Aderans Company Limited

Transcription

Aderans Company Limited A N N U A L R E P O R T 2 O O 4
A d e r a n s
From New Building Blocks Come New Growth
A
N N U A L
R
E P O R T
2OO4
Year ended
February 29, 2004
Uses soybean ink in
consideration of the environment
100% recycled paper
Printed in Japan
The Aderans Group
Maximizing value potential through Wellness
Directors and Auditors
Corporate Data
As of May 27, 2004
As of February 29, 2004
S OLID B RAND R EPUTATION
C HAIRMAN & CEO
H EAD O FFICE
Takayoshi Okamoto*
6-3, Shinjuku 1-chome, Shinjuku-ku, Tokyo 160-8429
replacement products and hair-related services for men and women. The Company
P RESIDENT & COO
E STABLISHED
maintains Japan’s leading brand of custom-made hair-replacement products for both
Katsuji Tokumaru*
March 1, 1969
sexes and has also built a solid presence in the women’s fashion wig market through
S ENIOR M ANAGING D IRECTOR
P AID - IN C APITAL
Mamoru Mino
¥12,944 million
Established in 1969, Aderans Co., Ltd., is a comprehensive provider of hair-
Fontaine Co., Ltd., a domestic subsidiary.
C OMPREHENSIVE P RODUCTS
AND
Deputy general manager and director of sales and marketing
headquarters
S ERVICES
We augment our mainstay custom-made wigs for men and women with a rich selection
N UMBER
41,713,388
Shigeru Ueda
steady expansion of Group operations beyond wigs and hair-replacement products to
In charge of satellite salon management division, business
development division and technical & education division
hair-growth treatments and medical procedures. Toward this end, we welcomed the
start of trial activities of our first affiliated clinic in February 2004.
Hiroyasu Yamakawa
General manager of administrative division
G LOBAL P RESENCE
Senkichi Yagi
Aderans heads a group of 28 consolidated companies — three operating in Japan and
General manager of sales and marketing division
25 overseas — with a Groupwide workforce of more than 5,400 people. Members of
S UPREME A DVISORS
especially in women’s fashion wig wholesaling. This achievement is complemented by
brisk sales of men’s wigs in Taiwan, South Korea and other areas of Asia.
CONTENTS
1 Consolidated Financial Highlights
2 Message from the Management
5 From New Building Blocks Come New Growth
Evolving Perspectives; Change and Growth;
New Pillar of Growth; Global Profile;
Good Corporate Citizen
AND
D IRECTORS
Nobuo Nemoto
Kunihiko Hirakawa
Haruo Okita
the Group in the United States and Europe have captured high market shares,
MISSION AND GOALS
S PECIAL A DVISOR
Our mission is to alleviate
S TANDING C ORPORATE A UDITOR
whatever concerns people
may have about hair loss,
regardless of the cause or
degree. Our corporate slogan
— Wellness — represents
concerted efforts to contribute
to people’s health and
happiness through an enhanced
physical appearance and a
positive state of mind. For
investors, we strive to achieve
long-term growth and higher
shareholder value.
AND
D IRECTOR
Nobuo Watabe
S HAREHOLDERS
Number of Shares and
Shareholding Ratio
Name
%
6,525
4,632
4,280
1,498
1,227
15.9
11.3
10.4
3.6
3.0
1,004
873
726
641
2.4
2.1
1.7
1.5
574
1.4
Notes: 1. The Company holds of 632 thousand of its own shares in treasury stock.
2. Those shares held by the Master Trust Bank of Japan, Limited, Japan Trustee
Services Bank, Ltd., and The Nomura Trust and Banking Co., Ltd., are shares
relating to their trust businesses.
S TOCK L ISTINGS
C ORPORATE A UDITORS
First Section of Tokyo Stock Exchange
First Section of Osaka Securities Exchange
Okio Akutsu
Masaaki Katagiri
Iwao Toigawa
Thousands of
shares
Japan Trustee Services Bank, Ltd. (Trust Account)
Nobuo Nemoto
The Master Trust Bank of Japan, Ltd. (Trust Account)
State Street Bank and Trust Company
Bank of Bermuda Sparx Asset Management
The Nomura Trust and Banking Co., Ltd.
(Investment Trust Account)
Nomura Securities Co., Ltd.
The Dai-ichi Mutual Life Insurance Company
Bank of New York Europe Limited Luxembourg
The National Mutual Insurance Federation of
Agricultural Cooperatives
Fumio Arai
T RANSFER A GENT
AND
R EGISTRAR
The Chuo Mitsui Trust and Banking Company, Limited
Securities Department
8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063
*Representative director
SALES AND MARKETING DIVISION
Hokkaido, Tohoku, Tokyo, Kanto, Chukyo, Kansai, Chugoku,
Kyushu
N UMBER
OF
O UTLETS
OF
E MPLOYEES
234
N UMBER
2,103
S TOCK P RICE R ANGE
Trading Volume
(Thousands of shares)
16 Domestic Strengths: R&D and After-Sales Services
F OR F URTHER I NFORMATION C ONTACT :
17 Financial Section
Investor Relations Division, Aderans Co., Ltd.
40 Subsidiaries and Affiliates
6-3, Shinjuku 1-chome, Shinjuku-ku,
Tokyo 160-8429, Japan
41 Directors and Auditors, Corporate Data
OF
S HARES I SSUED
P RINCIPAL S HAREHOLDERS
In charge of customer service division, IT control division, public relations division and investor relations division
research and development on hair-regeneration treatments. This move underpins
N UMBER
OF
10,620
Tsuguo Tanaka
presence in the U.S. hair-transplant business with the June 2002 commencement of
S HARES A UTHORIZED
Noboru Kaneko
D IRECTORS
the forefront of the hair-transplant and hair-growth markets, we have reinforced our
OF
138,033,400
M ANAGING D IRECTOR
In charge of advertising division and administrative division
of complementary products and hair-related services. Seeking to cement a position at
N UMBER
Tel. +81-3-3350-3268 Fax. +81-3-3356-3052
E-mail. ir_div@aderans.co.jp
Stock Price
(¥)
8,400
2,800
7,200
2,400
6,000
2,000
4,800
1,600
3,600
1,200
2,400
800
1,200
400
0
0
03
3 4
5
6
7
8
04
9 10 11 12 1 2
41
Consolidated Financial Highlights
Thousands of
U.S. dollars
Millions of yen
2004
2003
% change
2004
Net sales
Operating income
Net income
¥73,881
10,796
5,001
¥77,112
12,973
6,173
–4.2%
–16.8
–19.0
$673,976
98,490
45,625
PER COMMON SHARE AMOUNTS (yen and dollars):
Net income
Cash dividends applicable to the year
¥120.46
32.00
¥147.82
30.00
–18.5%
6.7
$
Total assets
Shareholders’ equity
Net cash provided by operating activities
Depreciation and amortization
Capital expenditures
¥91,048
73,884
7,558
2,368
5,078
¥92,864
70,303
9,729
2,285
2,537
–2.0%
5.1
–22.3
3.6
100.2
$830,579
674,007
68,955
21,603
46,324
OTHER YEAR-END DATA:
Number of shares outstanding (thousand)
Number of employees
40,997
5,373
40,357
5,406
1.6
–0.6
1.09
0.29
—
—
Notes: 1. The U.S. dollar amounts represent the arithmetical results of translating yen into U.S. dollars at the rate of ¥109.62 to US$1.
2. Net income per share is calculated based on the new accounting standard described on page 34 (Note 14).
SALES BY
PRINCIPAL
PRODUCT
HAIR-RELATED
BUSINESS
OTHER BUSINESS
¥444
¥73,436
Service revenues
¥17,822
(Millions of yen)
SALES BY REGION
Asia
¥566
Europe
¥2,670
(Millions of yen)
Total ¥73,881
Custom-made wigs
¥34,632
Total ¥73,881
North America
¥12,191
Other products
¥6,205
Japan
¥58,453
Ready-made
wigs
¥14,776
Note: The above figures exclude intersegment
transactions.
NET SALES
AND NET
INCOME TO
NET SALES
RATIO
Net Sales
(Billions of yen)
Net Income
to Net Sales Ratio
(%)
RETURN ON
ASSETS AND
RETURN ON
EQUITY
NET INCOME
AND NET
10
INCOME
PER SHARE
8
200
7.5
6
120
30
5
4
80
15
2.5
2
40
Return on Equity
0
Return on Assets
75
12.5
60
10
45
160
(Yen)
(%)
0
2000 2001 2002 2003 2004
0
12
10
8
6
4
Net Income
Net Income
per Share
14
0
2000 2001 2002 2003 2004
2
0
2000 2001 2002 2003 2004
This annual report has been prepared for non-Japanese investors and contains forward-looking statements that are based on management’s estimates, assumptions
and projections at the time of publication. Aderans cautions you that a number of factors could cause actual results to differ materially from expectations.
1
Message from the Management
Fiscal Review
On a consolidated basis, net sales and net income for fiscal 2004, ended February 29, 2004,
fell year-on-year, to ¥73.8 billion and ¥5.0 billion, respectively.
Priority issues for management in fiscal 2004 were to reinvigorate faltering sales to new
male clients in the domestic market and to promote measures, particularly advertising strategies, that would underscore improved demand from men. While our efforts were successful
in capturing steady sales from repeat male clients, they were insufficient to halt the downward trend in sales to new male clients.
We encountered a similar situation in the domestic women’s market, largely because
EFFECTIVE FROM FEBRUARY
29, 2004, TAKAYOSHI
Sifore, a new brand, took more time than we had anticipated to really attract the market’s
attention. This slow market response led to a delay in the recovery of sales to new female
clients. Regrettably, lackluster sales to new male and female clients had a pivotal impact on
OKAMOTO OFFICIALLY
net sales. On behalf of the Board, we extend our sincerest apologies to investors for our
ASSUMED THE POSITION
inability to meet performance goals in fiscal 2004.
Turning to overseas developments, we are happy to report that sales by our U.S. oper-
OF CHAIRMAN AND CHIEF
ations exceeded expectations, thanks to favorable results from Bosley Medical Institute,
EXECUTIVE OFFICER AND
Inc. Our European operations also marked year-on-year gains, in both sales and income.
KATSUJI TOKUMARU
In Asia, excluding Japan, efforts to attract new clients in Taiwan were hampered in the
first half of fiscal 2004 by the spread of Severe Acute Respiratory Syndrome — the SARS
BECAME PRESIDENT AND
CHIEF OPERATING OFFICER.
virus — in eastern Asia, but sales rallied somewhat in the second half. The past few
years have been characterized by unexpected events having global repercussions, most
notably the September 11 terrorist attacks in the United States and the spread of
SARS, but signs of recovery are definitely emerging in the business world.
Strategies for Fiscal 2005
The men’s wig business in Japan has been the pillar of Aderans’ operations since
the Company was established. For this reason, it is absolutely imperative for the
Aderans Group to revitalize demand in this market. Indeed, in fiscal 2005, we will
continue to emphasize higher sales from new male clients and, keeping advertising at the heart of our marketing strategy, we will turn three advertising-oriented
keys to unlock success.
One key is to enhance the image of wigs in society. Recently, television
commercials highlighting products and services to promote healthy hair
growth have become mainstream among our competitors. But at Aderans, we
believe that the steady rise in the number of people who are concerned about
their hair, or lack thereof, actually creates substantial latent demand for
wigs, the most effective solution to hair loss. To help us translate this latent
demand into sales, we renamed the Aderans Fathers’ Club in February
2004. The new name — Aderans Hair Club — is more general and more
inviting to men of all ages. We will also explore the potential of television commercials aimed at men in a wider age range that serve to erase
the negative image wigs have and encourage men to see wigs as more
everyday items.
2
The second key is to make the market more aware that Aderans
offers a comprehensive range of products and services, from wigs to
haircare items. We aim to tailor our advertising to specific age groups and
showcase aspects of interest to each segment. Our wide selection of products and services has captured the interest of many men, substantiated by
the fact that about 60% of the 20,000 plus inquiries we receive each year
from potential new male clients lead to contracts. But I’d like to find a way to
encourage the men who comprise the remaining 40% to try one of the many
Aderans products, too.
The third key is the development of new products for the men’s market that
distinguish Aderans from its competition. This key is indispensable from a medium-term perspective. We are going to focus on concept products, which are
intermediate solutions more sophisticated than services such as Hair Support and
Pinpoint, but not as extreme as the use of a wig.
WE
In the domestic women’s market, we will focus on three objectives to increase
HAVE NO INTENTION OF
IMPLEMENTING ANYTHING
RADICAL
—
NO STRATEGIES
sales to new female clients. First, we will establish a solid reputation for two brands:
the existing Eve Series and Sifore, the line that debuted in September 2003. By targeting a wider age range, we will increase the potential for higher sales to new female
clients. Second, we will organize try-on events in major urban centers throughout
THAT SHIFT MANAGEMENT
Japan as part of a fresh approach to marketing. Third, we will boost demand from
RESOURCES AWAY FROM
women through joint projects with Fontaine, which became a wholly owned subsidiary
THE MEN ’ S MARKET IN
in December 2003.
FAVOR OF THE WOMEN ’ S
MARKET .
In other domestic operations, we have expended a great deal of energy to set up the
hair transplant business, which will reinforce our profile as a comprehensive provider of
hair-replacement products and hair-related services. In February 2004, we opened our
first affiliated clinic, in the Shinjuku district of Tokyo. We expect the affiliated clinic to be
recognized as a legally incorporated medical institution around October 2004, after which
the affiliated clinic will open locations in major urban centers throughout Japan. In the
medium to long term, we aim to
establish business models for products that make hair look fuller and
that promote healthy hair growth
by integrating operations in the
domestic men’s market with the
hair-transplant business.
In overseas operations,
we have five main undertakings: to promote selfsustained growth in countries
where we already have a presence, expand the content of our
operations, and improve profitability; to reinforce our overseas
KATSUJI TOKUMARU
President and Chief Operating Officer (left)
TAKAYOSHI OKAMOTO
Chairman and Chief Executive Officer (right)
operating foundation; to pursue operations in regions where we currently do not have a presence,
such as newly developing markets; to take the hair transplant business global; to strengthen our
production structure and hone research and development capabilities.
Minimum profitability ratios have been set for each overseas subsidiary, effective from fiscal
2005, to encourage efforts to acquire larger slices of their respective markets and realize steadily
increasing sales and income. If unprofitable operations in a certain area fail to show improvement,
we may withdraw from that market.
Management Direction
The management direction of the Aderans Group emphasizes the development of business in three
core segments — products, such as wigs, that create the appearance of a fuller head of hair; medicinal therapies, specifically items that encourage the healthy growth of hair; and medical procedures,
namely hair-transplant services — to underpin the Group’s global position as a comprehensive
provider of hair replacement and hair-related services for men and women.
As far as management objectives are concerned, we aim for a ratio of recurring profit to net
sales exceeding 25%, on a non-consolidated basis, and return on equity exceeding 10%, on a consolidated basis. Our long-term business strategy is to raise the contribution of overseas sales to net
sales so that the ratio from domestic and overseas operations is 50:50.
WE
WILL SEPARATE
In our policy toward shareholders, we seek to return more than 50% of non-consolidated net
income to shareholders. Two pillars of this policy are stable dividends and treasury stock buy-
RESPONSIBILITY FOR
backs. On the latter point, we executed buybacks of 500,000 shares and one million shares in
MAKING DECISIONS
2003 and 2004, respectively.
AND EXECUTING THEM ,
Swift formation and implementation of strategies is imperative today, given the globally
diverse business activities of the Aderans Group in an operating environment characterized by
ACCELERATE THESE
significant changes at home and abroad. To achieve stated goals and ensure corporate growth
PROCESSES AND ACHIEVE
into the future, Aderans adopted a new management structure that makes the chairman and
OUR GOALS .
chief executive officer (CEO) accountable for long-term business strategies and gives the president and chief operating officer responsibility for executing regular business activities, according to the direction indicated by the chairman and CEO.
Based on a resolution passed at the Board of Directors’ meeting on February 12, 2004,
and effective from February 29, 2004, we officially assumed our new roles. These executive
changes lend a younger perspective to the way business gets done. Moreover, by giving
oversight for overseas strategies to the chairman and responsibility for domestic strategies
to the president, decisions pertaining to business expansion will be made more swiftly.
Both of us, as well as every employee in the Aderans Group, will work diligently to
fulfill our obligations and realize corporate objectives. We look forward to the continued support and encouragement of stakeholders and business associates.
June 2004
Takayoshi Okamoto
Chairman and Chief Executive Officer
Katsuji Tokumaru
President and Chief Operating Officer
4
AN INTERVIEW WITH
TOP MANAGEMENT
T he
Aderans Group seeks to
build a framework to support its
position as a provider of comprehensive hair-related products and
services.
From New Building Blocks
Come New Growth
Can the Aderans
Group achieve its growth objectives amid the challenges presented by today’s diversifying market?
Takayoshi Okamoto, chairman
and CEO responsible for overall
group strategies and overseas
operations,
and
Katsuji
Tokumaru, president and COO
responsible mainly for domestic
operations, share their views on
strategies aimed at achieving stated goals.
5
Question 1
Exactly what is Aderans doing to revitalize
the men’s market in Japan?
T o k u m a r u
Latent demand for comprehensive hair-related products
and services in the domestic men’s market appears to be
expanding, as the number of men in Japan with thinning
hair increases. I think wigs will be the predominant
choice of Japanese men seeking a solution to hair loss.
But against this promising backdrop, we have diversifying market needs and client groups to which we cannot
fully respond with existing products and services.
For example, Hair Support has been popular with young men. But
when these men enter middle-age, will they be receptive to wigs? We must
prioritize these men — the ones who have never used wigs before — in
our strategies and apply different tactics to identify evolving market needs.
Before
Evolving Perspectives
Advertising is a vital component of our strategy for attracting new
male clients. Following a review of the content and time period for our
television commercials — predominantly spot ads, a format we have
emphasized over the past two years — we decided to experiment with
program sponsorship as well.
We continue to promote greater interest in wigs and hair-replacement products through membership in the Aderans Hair Club, a relatively new approach to marketing, while testing the market waters on a
spectrum of topics, not just products and services but also pricing and
sales methods.
From a medium-term perspective, we will focus on medical procedures, products and services that promote healthy hair growth, and the
development of new products. At the same time, we will endeavor to
come up with intermediate products — more sophisticated than Hair
Support and Pinpoint but less radical than a wig — to erase any reluctance clients currently receiving Hair Support or Pinpoint services
might feel about switching to a wig.
Discovering a fast-acting cure for the ailing men’s market is not easy.
But we are extremely keen to mine the proverbial mother load that
exists in the men’s market and are implementing a variety of measures
that will help us find pay dirt.
6
After
Aderans developed the Aderans Hair
Club membership system to stimulate
demand for men’s products and services.
H AIR S UPPORT A QUA ,
A
SERVICE AVAILABLE SINCE
S EPTEMBER 2003,
USES A
PATENTED SOLUTION WITH
Japan’s Market Scale
Japan’s market for hair-related products and services — such as wigs (including
custom-made and ready-made wigs), products to create fuller-looking hair and
services to promote healthy hair growth — is estimated to be ¥167 billion annually.
The custom-made wig and hair support service market alone is worth about ¥120
billion, of which Aderans accounts for nearly 40%.
A HIGH CONCENTRATION OF
OXYGEN TO ACCELERATE
Men’s Market
SCALP REGENERATION .
A derans
has enjoyed top spot in the domestic industry for many years, an
achievement substantiated by the solid regard the Company’s custom-made wigs
have earned for high quality and the sophisticated technology that goes into making
them. Indeed, “Aderans” has become a synonym for men’s wigs and hairreplacement products.
From the time the Company was established, middle-aged men formed our
core of demand for wigs. But in recent years, demand from this client segment has
waned. In fact, sales to women have exceeded sales to men since fiscal 2002, and
demand from men, in general, is more for services, such as Hair Support, which
is directed toward younger men.
Aderans Hair Club
T he
renewal rate for the Aderans Fathers’ Club, the Company’s first
membership sales system, is about 80%. In February 2004, we changed the
name to the Aderans Hair Club, in an effort to make the name more inclusive
to men of all ages, not only fatherly figures in middle-age.
Marketing System
Conscientious marketing, underpinned by
salient advertising strategies, has given our
stress-free consultation system —
accessible by telephone or postcard —
a solid reputation. In recent years, we
have also enhanced the content on our
web site to enable potential clients
to use Hair Check and to confirm
STRATEGIC
ADVERTISING
TV
Magazines
● Web site
●
●
consultation appointments online.
Average monthly sales through the
web site reached about ¥800
million in fiscal 2004.
(Non-Consolidated)
(Non-Consolidated)
(Billions of yen)
(Billions of yen)
Custom-made
wigs
Male
Female
10
Hair Support,
Physical Esthé
0
MEMBERSHIP SALES
Male
Female
2000 2001 2002 2003 2004
SYSTEM
(Aderans Hair Club)
30
Custom-made wigs,
Hair Fix, and
Pinpoint Fix
+
Hair support
services
20
Female
New
Repeat
Consulting
+
Hair check
(Free)
SALES BY PRODUCT
SALES BY GENDER
Male
New
Repeat
SERVICES VIA
NATIONWIDE
NETWORK
20
10
0
After-sales
services
2000 2001 2002 2003 2004
Question 2
In December 2003, Aderans acquired 100% equity in Fontaine
through a share exchange and turned the company into a wholly
owned subsidiary. What does Aderans gain from this move?
T o k u m a r u
Through this move, we enhance business mobility in the domestic women’s market — a favorable domain — while strengthening
executive and capital strategies, encouraging greater management
efficiency, and elevating the corporate value of the Aderans Group.
The Group’s products for women — basically, Aderans’ custommade wigs and Fontaine’s fashion wigs — have always complemented each other. But to protect the interests of shareholders in
both companies, neither Aderans nor Fontaine could suggest the
other’s products to its own clients.
Change and Growth
The new equity structure changes that. We can now promote
products to Fontaine’s clients, and vice versa, through our salon
networks and through the barber and hairdressing salons that form
Fontaine’s primary distribution channel. No more lost opportunities within the Group.
We will be able to combine our efforts, sharing market information to reinforce sales and teaming up on the development of new
products. We will also be able to integrate Fontaine’s Beauty
Support System into our new-concept salons.
We plan to commit resources to the creation of products under
the brands of both companies that will grab the attention of
women younger than those we currently target. We will utilize
Fontaine’s new status to underpin the strategic development of
products in a wider price range for women of a more diverse age
group. Other members of the Aderans Group will benefit, as well,
through access to Fontaine’s distribution channels.
Fontaine’s transformation into a wholly owned subsidiary is
part of a vital management priority that parallels Aderans’ entry
into the hair-transplant business: the restructuring of domestic
Group activities, specifically the establishment of a holding
company sometime in the future.
8
FONTAINE SALES BY
PRODUCT
(Millions of yen)
Wigs
9,259
● VALAN
5,846
● Fontaine wigs 2,759
● Hairpieces
220
● Hair-related
products
434
● Other products
954
E VE Q UEEN
Women’s Market
IS DISTINGUISHED
Sales from the domestic women’s market com-
BY ITS RICH VARIETY OF
prise sales from Aderans, the parent, which focuses
COLORS , A RESULT OF
A DERANS ’
on custom-made wigs, and Fontaine, which specializes in fashion wigs. In fiscal 2004, sales to
PROPRIETARY
women in Japan reached ¥32.6 billion, with Aderans
TECHNIQUE TO CREATE
contributing ¥22.3 billion, down 4.0% year-on-year,
and Fontaine providing ¥10.2 billion, down 2.3%.
ALTERNATELY COLORED
STRANDS .
Aderans’ Brand Strategy
Aderans has increased sales to women in the 50–70 age
group by emphasizing the high quality of the Eve Series, a
well-established brand of custom-made wigs. But demand
from new clients could falter as the make up of this age group
shifts to the over-60s. To offset the possibility of a negative
effect on sales, Aderans reviewed the timing of new products
and launched a new brand, Sifore, in September 2003, geared to
younger women.
A two-brand structure, hinging on the Eve Series and Sifore,
will allow us to target a wider range of ages and, with alternating
investment in new products, such as our own introduction of Eve
Queen in March 2004, we will be able to raise brand recognition,
which will in turn boost sales.
On the service front, we debuted Reage Hair Support, an allinclusive haircare system for women, in March 2003, to meet heightened demand for haircare services from our female clients.
In our marketing efforts, we are working to augment existing distribution channels, such as our salon network, with fresh marketing
approaches. For example, we are scheduling additional try-on events in
major urban centers throughout Japan. We are also exploring ordinary
access routes to the market, through retailers, such as Tokyu Hands, a
A DERANS
chain of do-it-yourself and hobby stores, which began selling Mederona, a
UTILIZES THREE
series of haircare products for middle-aged women in May 2004 as a follow-
PRIMARY SALES CHANNELS IN
J APAN :
up to the 9696 (“kuro-guro”) Series, a collection of medicated haircare prod-
REGULAR SALONS , WHICH
ucts, for men.
ARE LOCATED IN MAJOR URBAN
Fontaine Brands
CENTERS THROUGHOUT THE
Fontaine’s product list comprises about 200 items in three categories: wigs;
COUNTRY ; SATELLITE SALONS ,
Top Piece, a hairpiece; and Posté, a hair accessory. The company offers fashion
wigs under three brands — Fontaine, made from the highest-quality synthetic
WHICH CATER TO CLIENTS
fibers; Valan, a luxurious blend of natural and synthetic fibers; and Roloc,
OUTSIDE LARGE CITIES ; AND
NEW - CONCEPT SALONS , WHICH
OFFER
A DERANS ’
SERVICES IN
ADDITION TO TYPICAL BARBER
AND HAIRDRESSING SERVICES .
which features two-toned strands created with a proprietary
OUTLETS
technique — all of which have earned top marks for design
(As of February 29, 2004)
Counseling Offices
Regular Salons
Ladies’ Salons
Satellite Salons
New-Concept Salons
9
138
25
52
10
and fashionability.
9
Question 3
What is the status of hair-transplant
services in Japan?
T o k u m a r u
Preparations to establish hair-transplant services in Japan culminated in February 2004 with the opening of our first affiliated clinic,
Wellness Shinjuku Clinic. We do not run this medical facility, but
we grant the doctor in charge access to the know-how of U.S.-based
Bosley Medical Institute, Inc., a member of the Aderans Group
and a leader in hair restoration, and we accept fees for providing
technology- and business-related support.
We expect authorities in Japan to give the clinic corporate medical institution status in October 2004. Once the clinic has official
status, additional locations will be established in such major urban
centers as Osaka and Nagoya, by the end of the current fiscal year.
We’d like to see eight locations in operation within five years.
New Pillar of Growth
Adding hair-transplant services to our business content provides
the obvious merit of an expanded service menu for clients. But
because wigs and hair-transplant procedures are often used together
in treating hair loss, these services also hold great potential for
boosting sales of wigs to men who might have had no interest in
wigs before considering a hair transplant.
However, the rosy prospect is tempered by two vital issues in further expansion of hair-transplant services. First, we have to identify
a way to make society receptive to these medical procedures.
Second, we have to find and retain skilled surgeons.
We will devote the necessary time and energy to grow this business in Japan. Our reward will be higher sales in the domestic men’s
market.
10
THE ENTIRE ADERANS GROUP
BENEFITS FROM THE BUSINESS
KNOW-HOW OF GROUP
COMPANIES IN THE
UNITED
STATES, PARTICULARLY IN
TERMS OF
R&D INTO
MEDICINAL THERAPIES AND
MEDICAL PROCEDURES.
Domestic Environment
In the United States, where hair-transplant procedures are a well-established
treatment for thinning hair, the market for such operations is worth the equivalent of ¥80 billion to ¥100 billion. The size of the market in Japan, based on
population, is estimated between ¥40 billion and ¥50 billion.
We will have to clear two hurdles to get hair-transplant services really going
in Japan. First, the Medical Service Law prohibits a private company from providing services as a medical institution. But a policy is being considered that
would facilitate the participation of nonprofit medical institutions in the medical profession through the Ministry of Health, Labor and Welfare. Second, a
medical institution is allowed to promote its name, but it cannot advertise the
effectiveness of services that are performed at the facility.
Aderans Group’s Medical Procedures Business
The Aderans Group seeks to be a provider of comprehensive hair-related
products and services for men and women with activities in three core segments — wigs, medicinal therapies and medical procedures. In the United
States, which functions as our business model, we are already involved in all
three businesses.
In August 2001, Bosley Medical Institute, Inc., the largest provider of
hair-transplant services in the United States, came under the Aderans
Group umbrella. This company, with 12 clinics and 33 consulting offices
in North America, is recognized worldwide as a pioneer in the hair-transplant field.
In June 2002, we established Aderans Research Institute, Inc., in
California, to undertake research and development on hair-regeneration treatments. Working toward the commercialization of hair-regeneration techniques by 2007, the company is tackling R&D at two
laboratories, in Philadelphia, Pennsylvania, and Atlanta, Georgia.
Activities are moving steadily closer to the clinical trial stage.
What is hair transplantation?
Even in the field of cosmetic
surgery, hair transplantation is considered a sophisticated med-
Aderans Research Institute, Inc., Atlanta, Georgia
ical procedure whereby a section of the patient’s own scalp with
healthy hair roots is surgically removed and relocated to the
area of hair loss. In a market where most providers are doctors
in private practice, Bosley Medical Institute holds the top
share — about 10% — with net sales of $71 million for the
fiscal year ended December 31, 2003.
What is hair-regeneration technology?
Hair-regeneration
technology is a process whereby a small amount of hair
follicle cells — the cells that produce hair roots — is
cultivated and transplanted into the scalp. The procedure can be used to help burn victims and people
Bosley Medical Institute, Inc.
who have lost hair due to cancer.
11
Question 4
What are your medium- to long-term strategies
and expectations for overseas operations?
O k a m o t o
Our long-term vision is to establish Aderans as
the world brand of a group of companies providing
comprehensive hair-related products and services.
In our growth strategy, our medium- to long-term
objective is to have domestic and overseas operations contribute equally to consolidated net sales.
The first step toward this goal is to capture leading
shares in each of the overseas markets where we
have a presence. More specifically, if we can achieve a 40% share
in markets where our subsidiaries already exist, we will be able
to set industry prices in each market. Other companies in the
industry will have to follow our lead.
Global Profile
Our overseas network has four regional hubs: Japan, Europe,
the United States and Asia, excluding Japan. Holding companies
have already been set up in the United States — Aderans Holding
Co., Inc. — and in Europe — Aderans Europe B.V. — but in the
near future we’d like to bring companies in each geographical area
outside of Japan under a regional holding company. Profits earned
in a particular region would be reinvested there, and operations
would naturally expand. Under this plan, each regional hub
would gain independence and a higher degree of freedom in
determining activities suited to the respective markets. Over
the medium to long term, we will allocate headquarter functions
to each regional holding company. In a supervisory capacity, each
holding company will be run by a CEO and a COO who carry the
responsibilities now shouldered by the head office in Japan.
To promote steady progress toward our ultimate goal, we have
set down groupwide and region-specific numerical targets for contribution to consolidated net sales, as well as performance figures,
such as net sales and recurring profit, for fiscal 2005. Concrete
efforts directed at achieving these targets are already under way.
12
The Noriko Collection features individual strands of
multicolored fibers developed through Aderans’ proprietary technology.
Two-Sided Market Strategy
The overseas strategy of the Aderans Group is two-sided, with activities in each
region geared to local conditions. In the United States and Europe, where the market
for wigs and hair-replacement products is already well established, we have expanded our presence through mergers and acquisitions of wholesaling operations. In
Asia, excluding Japan, we have applied the business model used in Japan to promote our brands directly to end users through retail shops. We have also endeavored to cultivate new markets.
Global Production System
Aderans has three manufacturing
and product development facilities in
Thailand and one in the Philippines.
We have lowered overall production costs for the Group by concentrating production in Thailand and the
Philippines. The annual production
capacity of the Group amounted to
about 115,000 wigs in fiscal 2004.
U.S. Market
Aderans is developing a stronger U.S. presence in everything from retailing and wholesaling to hair-transplant services and hair-regeneration R&D through 11 companies,
including four that wholesale men’s and women’s wigs; Aderans, Inc., a retailing company;
and Bosley Medical Institute, Inc., which provides hair-transplant services, under the
Aderans Holding umbrella.
Solid efforts by local subsidiaries have locked the Aderans Group into the market
lead, with 40% to 50% of the wholesale market for women’s wigs and hairpieces. Of
note, International Hairgoods, Inc., which handles men’s Cyberhair hair-replacement
products, enjoys top spot in the U.S. wholesale market for men’s wigs.
In December 2002, Aderans, Inc., marked the beginning of full-scale retailing
activities in the United States with the opening of a store called Roloc inside a major
Aderans Thai, Ltd., and World Quality
Co., Ltd. World-class production
facilities with a combined workforce
of about 4,000 people.
Aderans Philippines, Inc. Assumed
operations of Allan Arthur (Manila) and
relocated from superannuated premises
to newly built facility, where full-scale
production commenced in February
2004, with a workforce of about 750
people.
shopping destination — the Roosevelt Field Mall, in Garden City, New York.
We expect the hair-transplant business of Bosley Medical Institute to be a key
source of revenue in the United States. This performance outlook is made brighter
by continued expansion of the company’s network of counseling offices.
European Market
Nine companies, with operations in France, Germany, Belgium, the Netherlands, and the United Kingdom, fall under the umbrella of Aderans Europe
B.V., a holding company based in the Netherlands.
Aderans seeks to establish a distribution network in Europe mirroring the
one in the United States that encompasses wholesaling and retailing. A step
in this direction came in May 2002, when Trend Hair Supplies Co., Ltd., a
major retailer of wigs in the United Kingdom, with headquarters in East
Sussex, joined the Aderans Group.
Asian Market
Aderans has sales subsidiaries in Taiwan, South Korea and Thailand
and is focusing its expansion efforts in Asia, outside of Japan, on retailing.
In October 2002, Aderans Singapore Pte. Ltd. opened its first
retail outlet in Singapore and kicked off the Group’s retail presence
in the Asia-Oceania region.
Aderans Inc. (Taiwan) sells custom-made wigs and provides
related services through five directly operated salons.
Aderans Siam Co., Ltd. is a vital point for strategic product
development, collecting a range of data, from product development to distribution, on Group companies.
13
Question 5
What is Aderans doing to be a socially
responsible corporate citizen?
O k a m o t o
Everything we do to cement our position as a globally active provider
of comprehensive hair-related products and services is underscored by
an ongoing commitment to ensure that our operations have a positive
effect on society.
An obvious example is the presentation of medical-use wigs to people
who have lost hair due to sickness or injury. A not-so-obvious example
is the Tokyo Hair Beauty College. The school is most certainly a business
but ultimately the instruction provided here promotes the development
of skilled hair stylists who meet the haircare needs of society.
We strive to be a good employer by fostering a healthy work
environment.
We also contribute to regional societies through the creation of
stable jobs, particularly in Asia, outside of Japan.
From a perspective of management transparency and stability, we
are working to reinforce corporate governance. We are enhancing the
activities of various executive groups, such as the Board of Directors,
the Executive Committee and a reporting group consisting of directors
and general managers, to expedite the making of decisions and their
execution. This will enable us to respond more appropriately to the
fast-paced changes characterizing our operating environment.
Rather than implementing a formal reorganization, we are making
qualitative improvements to clarify administrative responsibilities and
the authority for executing business activities.
In 2001, Aderans worked with the Ministry of Economy, Trade and
Industry to establish the Japan Hair Industry Association as a means
to reinforce the disclosure practices of domestic companies providing
wigs, products to make hair look fuller and products to promote
healthy hair growth. The formation of such an association highlights
the fact that the industry has developed to a point where providers of
hair-related products and services have a significant influence on society. I am the association’s representative director, and my goal is to
inspire greater consumer confidence in the industry while promoting
sound development of the industry itself.
14
I N T HAILAND ,
Environmental Protection and Quality Control Efforts at Aderans Thai
OUR
PRODUCTION FACILITIES
and World Quality
Aderans Thai and World Quality were quick to get involved in environmental protec-
ARE ACTIVE IN VARIOUS
tion and quality control activities. In 1999, the International Standards Organization cer-
ENVIRONMENTAL PURSUITS .
tified both manufacturing facilities with ISO 14001 for environmental protection
systems and ISO9002 for quality control, based on 1994 criteria. These production subsidiaries are now keen to acquire certification based on 2001 criteria.
Major environmental protection efforts at Aderans Thai and World Quality
●
Prevent water pollution by factory wastewater
●
Prevent air pollution within the facility
●
Ensure safe processing of industrial waste
●
Promote effective use of available resources
●
Improve working conditions within the facility
Major Community Activities in 2003
June Sponsored the 2nd Aderans Wellness Open, on the Senior Professional Golf
Association Tour circuit.
July Established the Wellness Workshop, a facility for the disabled that is attached
to the manufacturing headquarters.
August Sponsored the 9th Aderans Children’s Soccer Festival.
Sponsored the 7th Aderans Summer Holiday Children’s Golf Competition.
October Sponsored the 19th Aderans Love Charity campaign.
Aderans Love Charity Aderans initiated the Aderans Love Charity campaign
in 1978 as a way to donate custom-made wigs to children up to age 15 who
had lost their hair through accident, injury, hair-related illness or as a sideeffect of medical treatment, such as radiation therapy or chemotherapy.
During the most recent campaign, which ran from October 2003 to
November 2003, 200 children were randomly selected to receive wigs. The
number of children to whom Aderans has donated wigs reached almost
4,000 from the first to the most recent campaign.
Aderans Wellness Open Aderans has become the regular sponsor of an
event — the Aderans Wellness Open — on the 3rd Senior Professional
Golf Association Tour schedule. The Company sees the tournament as
an excellent opportunity to contribute to regional society by encouraging seniors to be more active.
Aderans Love Charity
The most recent tournament was held in June 2004 at a golf
course in Niigata operated by ADN, a member of the Aderans
Group. The event attracted many spectators from diverse backgrounds; everyone, from children to seniors and from locals to
Aderans Wellness Open
dedicated golf fans, found something to enjoy.
Children’s Soccer Festival
15
Aderans is the recognized industry leader in Japan, a position substantiated
Domestic Strengths:
R&D and After-Sales
Services
not only by brand power but also by sophisticated R&D capabilities and the
solid technical expertise shown by after-sales service staff.
Main Products and Services
Custom-made Wigs
All of Aderans’ wigs and hair-replacement products are custom-made. The
Company offers the Fit System, for men and women who seek overall coverage, and the Plus System, for men and women who want more volume in
Cyberhair
Cyberhair, developed by Aderans and
certain places.
patented in 11 countries, possesses proper-
Cyberhair CA30, a wig that can be worn continuously, and Hair Fix and
ties incredibly similar to real hair, with
Pinpoint Fix, which add volume in a particular area. Each method is tai-
excellent durability, heat-resistance, water
lored to the specific needs of the individual.
For men, we offer various volume-increasing methods, such as
absorption and stable light-refraction
For women, we feature the Eve Series, aimed primarily at women in
qualities, in addition to natural luster
their 60s and older, and Sifore, directed toward women in their 40s and 50s.
and texture.
Fontaine complements Aderans’ lineup with fashion wigs for younger women. The consolidated subsidiary is actively promoting its products nationwide.
Care System
Natural hair
Cyberhair
Conventional
artificial hair
In addition to wigs and partial hair-replacement products, Aderans offers Hair Support, a service that promotes healthy hair growth by improving hair quality
and preventing hair loss, and Physical Esthé, a service that restores
the health of hair damaged by sunlight or chemical treatments, for
example. These services have earned the Company high marks
Counseling Skills and Staff
Expertise
Our counseling staff will set up meetings
with a potential client at a salon or visit the
individual’s own home to provide ample
advice and draw up contracts for products
and services.
After-sales services, such as a haircut
from clients, particularly women and younger men.
R&D Division
Product and technology development for the Aderans Group
revolve around the R&D Division in Niigata Prefecture. The
fabrication of a high-quality wig depends on several key
technologies, such as molding technology, which ensures a
perfect fit through faithful reproduction of head shape,
following the purchase of a custom-made
flow of hair, whorls, receding hairline and other charac-
wig, are an extremely important aspect of
teristics unique to each client. The technology used to
our operations, substantiated by the fact that
make the polyurethane foundation of wigs and hair-
about 60% of our employees are involved in
pieces produces a safe and hygienic artificial skin with
service-related activities. Trained professionals
are available at more than 200 salons nationwide to provide services and products to
client when and where needed.
16
color and texture extremely close to real skin.
Financial Section
CONTENTS
17 Consolidated Five-Year Summary
18 Consolidated Financial Review
24 Consolidated Financial Statements
37 Report of Independent Auditors
38 Non-Consolidated Five-Year Summary
39 Non-Consolidated Operating Data
Consolidated Five-Year Summary
Aderans Company Limited and Consolidated Subsidiaries
Years ended the last day of February
2004
RESULTS OF OPERATIONS
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Income before income taxes
Net income
Research and development expenses
AMOUNTS PER SHARE
OF COMMON STOCK
(IN YEN)
Net income
FINANCIAL POSITION
Current assets
Current liabilities
Interest-bearing debt
Total assets
KEY RATIOS (%)
Operating income to net sales
Net income to net sales
Shareholders’ equity to total assets
Return on equity
Return on assets
Interest-bearing debt ratio
OTHER YEAR-END DATA
Number of employees
Millions of yen
2003
2002
2001
2000
¥ 73,881 ¥ 77,112 ¥ 74,181 ¥ 67,022 ¥ 64,187
13,146
60,734
49,938
10,796
10,229
5,001
5,078
591
2,368
13,080
64,032
51,058
12,973
12,742
6,173
2,537
519
2,285
13,324
11,522
10,333
60,856
55,499
53,854
44,197
39,574
38,593
16,659
15,925
15,261
15,788
14,523
13,047
9,200
8,020
5,887
2,715
2,537
3,756
315
372
214
2,270
2,209
1,841
¥ 120.46 ¥ 147.82 ¥ 224.76 ¥ 194.63 ¥ 141.30
1,798.67
32.00
1,737.41
30.00
1,678.28
1,509.60
1,344.16
28.00
26.00
25.00
¥ 35,029 ¥ 39,282 ¥ 33,830 ¥ 37,979 ¥ 28,829
11,778
—
73,884
91,048
13,638
—
70,303
92,864
14,966
13,462
12,383
145
749
851
68,577
62,126
55,648
92,284
83,890
75,101
14.6
6.8
81.2
6.9
5.4
—
16.8
8.0
75.7
8.9
6.7
—
22.5
23.8
23.8
12.4
12.0
9.1
74.3
74.1
74.1
14.1
13.6
10.9
10.4
10.1
7.9
0.2
0.9
1.1
40,997
5,373
40,357
5,406
40,861
41,154
41,400
5,172
4,544
4,504
Note: Net income per share and shareholders’ equity per share for both 2004 and 2003 are calculated based on the new accounting standard.
17
Consolidated Financial Review
The scope of consolidation for this review of fiscal 2004, ended February 29, 2004, covers Aderans Co.,
Ltd. — the Company — and 28 consolidated subsidiaries: three domestic subsidiaries, including
Fontaine Co., Ltd., and 25 overseas subsidiaries, including the newest member of the Aderans Group,
wig manufacturer Aderans Philippines, Inc.
Net Sales, Expenses
and Profitability
Net sales fell 4.2%, to ¥73,881 million ($673 million), largely because of a 5.5% reduction in the contribution from domestic operations as Aderans, the parent, and Fontaine both posted year-on-year
decreases over fiscal 2003.
Millions of yen
Operating Data
Net sales
Operating income
Net income
Net sales per employee
Net income per employee
Number of employees
2004
2003
% Change
¥73,881
10,796
5,001
13.8
0.93
5,373
¥77,112
12,973
6,173
14.3
1.14
5,406
–4.2%
–16.8
–19.0
–3.6
–18.5
–0.6
Cost of sales edged up 0.5%, to ¥13,146 million ($119 million), primarily because of a temporary rise in
the valuation of inventory at a U.S. subsidiary. The cost of sales ratio grew 0.8 percentage point, to 17.8%.
Cost of Sales and Selling, General
and Administrative Expenses
Millions of yen
Cost of sales
Advertising expenses
Personnel expenses
Other
2004
2003
¥13,146
49,938
12,109
19,556
18,272
¥13,080
51,058
12,982
19,558
18,518
% Change
0.5%
–2.2
–6.7
–0.0
–1.3
Selling, general and administrative (SGA) expenses inched down 2.2%, to ¥49,938 million ($455
million), thanks to lower consolidated advertising expenses, which shrank 6.7%, to ¥12,109 million
($110 million). Of note, Aderans, the parent company, curbed its use of funds for advertising and promotions by ¥705 million, while Bosley Medical Institute recorded a slight increase, on a dollar basis. But
the ratio of advertising expenses to net sales at Bosley Medical Institute actually improved because of the
company’s higher net sales performance. Also of note, expenses incurred in the United States increased as
much as 2.5% on a dollar basis, but due to yen appreciation, these costs decreased 4.5%, on a yen basis.
The pressure of these expenses squeezed operating income again, pushing it down 16.8% in fiscal
2004, to ¥10,796 million ($98 million).
COST OF SALES,
SGA EXPENSES
AND OPERATING
INCOME TO
NET SALES
RATIOS
60
(%)
40
6,000
10
20
3,000
5
NET INCOME, AND
NET INCOME TO
NET SALES
9,000
RATIO
0
0
0
2000
18
15
(Millions of yen/%)
2001
2002
2003
2004
Cost of sales ratio 16.1 17.2
SGA expenses ratio 60.1 59.0
Operating income
to net sales ratio 23.8 23.8
18.0
59.6
17.0 17.8
66.2 67.6
22.4
16.8 14.6
2000
2001
2002
2003
2004
Net income
(Millions of yen) 5,887 8,020 9,200 6,173 5,001
Net income to net
sales ratio (%)
9.1 12.0 12.4 8.0 6.8
Notable developments in non-operating income and expenses were a ¥341 million ($3.1 million)
gain on the sale of investment securities by Aderans, the parent company, and a ¥182 million ($1.6 million) loss on the valuation of inventory, also by the parent company. Under other expenses, the Company
booked ¥825 million ($7.5 million) as devaluation of land, caused by a difference in the book value and
the fair value of the transaction for a real estate deal between the parent and Fontaine.
A drop in income before income taxes prompted a 12.8% drop in corporate income taxes, to ¥5,728
million, while Fontaine’s December 2003 transformation into a wholly owned subsidiary cut minority
interests 60.4%, to ¥141 million.
Consequently, net income decreased 19.0%, to ¥5,001 million ($45 million), and net income per
share dropped to ¥120.46 ($1.09).
Yen
Per Common Share Data
2004
Net income per common share
Shareholders’ equity per common share
Cash dividends per common share
¥ 120.46
1,798.67
32.00
Net Sales by Region
Japan
Key Ratios by Geographic Area
Sales growth ratio
Operating income (loss) to net sales
Operating income (loss) (millions of yen)
Asset turnover ratio (times)
Operating income (loss) to total assets
2003
2004
2003
–5.4%
24.9%
¥14,560
0.88
21.9%
–3.5%
26.7%
¥16,509
0.97
25.9%
% Change
¥ 147.82
1,737.41
30.00
North America,
Europe and Asia
2004
2003
0.9%
–0.3%
¥(51)
0.78
–0.3%
50.8%
0.1%
¥16
0.69
0.1%
–18.5%
3.5
6.7
Average/Total
2004
2003
–4.2%
19.6%
¥14,508
0.86
16.8%
4.0%
21.4%
¥16,525
0.90
19.2%
The figures above, except sales growth rate, represent those before adjustments for and eliminations of unallocated corporate expenses
and assets.
Japan
Domestic sales comprise contributions from Aderans, the parent, and Fontaine, both
involved in hair-related businesses, and two other consolidated subsidiaries, which are
involved in activities other than hair-related businesses.
Aggregate sales generated in Japan reached ¥58,532 million ($533 million), down 5.5%, but still represented the largest percentage — 79.0% — of consolidated net sales.
A breakdown of sales by Aderans, the parent, and Fontaine in the domestic market by product category reveals a 5.0% drop in sales of custom-made wigs, to ¥33,771 million, and 1.3% decline in sales of
ready-made wigs, to ¥9,262 million, despite favorable demand at department stores and directly operated
stores. Sales of other hair-related products tumbled 13.8%, to ¥5,587 million, while service revenue fell
5.8%, to ¥9,387 million, owing to slow demand from new clients. Other business income edged down,
to ¥444 million. Intersegment sales continued to decline, settling at ¥79 million in fiscal 2004, following
the end of Aderans’ intermediary role in sales to the United States and Europe.
As a result, operating income decreased 11.8%, to ¥14,560 million ($132 million).
NET SALES BY
REGION
(Billions of yen)
OPERATING INCOME
(Millions of yen)
60
15,000
40
10,000
20
5,000
0
0
2000
Japan
Asia
North America
Europe
Total
2001
2002
2003
2004
58.4 60.9
0.5 0.6
3.3 3.7
1.8 1.6
64.1 67.0
64.0
0.7
7.5
1.8
74.1
61.8 58.4
0.7 0.5
12.4 12.1
2.1 2.6
77.1 73.8
2000
Japan
Asia
North America
Europe
Eliminations
Total
2001
2002
2003
2004
17,543 18,331 19,696 16,509 14,560
1,080 1,142 1,433 1,371 988
(22)
65 (450) (1,343)(1,045)
3
(12) (68) (11)
4
(3,344) (3,601) (3,952) (3,552)(3,721)
15,261 15,925 16,659 12,973 10,796
Note: The above figures exclude intersegment transactions.
19
ADERANS’ PERFORMANCE
Aderans posted non-consolidated net sales of ¥47,757 million ($435 million), down 6.2%, because higher
sales to repeat female clients could not offset faltering demand from new and repeat male clients as well
as new female clients. Specifically, sales to new female clients dropped 12.1%, because Sifore, a new
brand launched in September 2003, took longer to permeate the market than anticipated and led to a
delayed recovery in sales to this client segment. Sales to new male clients retreated 23.3%, despite
promising measures, such as promotions and a free-of-charge trial campaign.
Aderans managed to cut cost of sales 5.7%, to ¥7,998 million ($72 million), for a cost of sales ratio of
16.7%. Tighter control over advertising expenses helped trim SGA expenses 2.7%, to ¥30,553 million
($278 million).
Ultimately, however, the weakened net sales starting point caused non-consolidated operating
income to fall 16.2%, to ¥9,205 million ($83 million).
Noteworthy components of other income and expenses that had a bearing on non-consolidated performance are the same as those already described in the consolidated performance portion of this
financial review.
Net income ended up at ¥5,671 million ($51 million), down 12.4%.
Capital expenditures more than tripled, to ¥5,709 million ($52 million). Most of this increase is
accounted for by ¥1,539 million used in a land deal with Fontaine and ¥2,772 million used to acquire
land and buildings for salons.
In salon development, Aderans opened nine new locations: two regular salons; three satellite salons;
and four new-concept salons. Six salons were relocated.
The Company maintained stable dividends for shareholders. The end-of-year dividend was raised one
yen, to ¥16 per share. Combined with the interim dividend of ¥16, also one yen higher than a year earlier,
the annual dividend was ¥32 per share.
Millions of yen
ADERANS’ NEW MALE
CUSTOMERS
BY AGE
(%)
Under 20
20s
30s
40s
50s
60s
70 and over
Net Sales of Aderans by Product Category
Custom-made wigs
Hair Fix
Pinpoint
Hair Support
Physical Esthé
Subtotal
Other
custom-made wigs
2.5%
Ready-made wigs
46.8
26.0
Other sales
12.4
Service revenues
7.1
Total
3.9
(%)
ADERANS’ SALES OF
PRINCIPAL
20
PRODUCTS
BY GENDER
(Billions of yen)
20
2003
2002
2001
2000
¥31,599
108
1,908
5,516
1,191
40,325
84
8
4,687
2,652
¥47,757
¥32,950
167
2,300
5,997
1,455
42,872
68
16
5,449
2,481
¥50,888
¥33,435
233
3,010
6,460
1,513
44,653
67
1,899
6,064
2,590
¥55,275
¥31,096
399
3,562
6,321
1,122
42,501
80
1,690
5,983
2,469
¥52,726
¥31,328
551
2,354
6,079
453
40,765
58
1,624
5,666
2,632
¥50,746
1.3
ADERANS’ NEW FEMALE
CUSTOMERS
BY AGE
Under 20
20s
30s
40s
50s
60s
70 and over
2004
0.6%
0.9
2.0
5.3
17.8
36.6
36.8
ADERANS’ SALES OF
PRINCIPAL
20
PRODUCTS TO
NEW AND REPEAT
CUSTOMERS
15
(Billions of yen)
10
10
5
5
0
0
2000
Female
Male
15
2001
2002
2003
2004
18.7 19.9 23.1 23.3 22.3
22.0 22.5 21.4 19.5 17.9
2000
New
Repeat
2001
2002
2003
2004
17.3 18.5 20.8 18.5 15.6
23.3 23.9 23.7 24.3 24.7
FONTAINE’S PERFORMANCE
In December 2003, Aderans, the parent company, acquired all remaining equity in Fontaine through a
share exchange and turned the company into a wholly owned subsidiary. Prior to this, in November
2003, Fontaine delisted from the Second Section of the Tokyo Stock Exchange.
Fontaine maintains the top share — about 30% — of the women’s fashion wig market in Japan. The
company enjoys a high profile through its presence at 175 department stores — the cornerstone of its
sales network — and through various marketing channels, including wholesale supply to some 100,000
beauty salons and fine cosmetics stores across the country, sales at 38 directly operated shops, and mail
order.
For fiscal 2004, Fontaine recorded net sales of ¥10,213 million ($93 million), a 2.3% erosion that
reflects sluggish sales through beauty salons. A look at sales by product category shows that sales of
mainstay fashion wigs and hair accessories slipped 1.2%, to ¥9,259 million ($84 million).
By marketing channel, the wholesale route posted a 3.5% decrease in sales, to ¥7,798 million,
because a 17.9% drop in sales through beauty salons and a combined 7.2% decline in sales through cosmetics stores and by mail order more than offset a modest 1.5% gain in sales through department stores.
The retail route registered a 13.1% improvement in sales, to ¥1,461 million.
Sales of other products, namely products other than fashion wigs and hair accessories, amounted to
¥953 million, down 11.7%.
Net income plunged 61.8%, to ¥409 million ($3.7 million).
Asia
The Aderans Group continues to expand its presence in Asia, outside its home base
in Japan, with subsidiaries in Taiwan, South Korea, Singapore, Thailand and the
Philippines. Consolidated subsidiaries are Aderans Inc. (Taiwan), which markets wigs; Aderans Thai.,
Ltd., and World Quality Co., Ltd., which manufacture wigs and hair-replacement products in Thailand;
and Aderans Philippines, Inc., which produces wigs and hair-replacement products in the Philippines.
Aggregate net sales in Asia, excluding Japan, reached ¥4,936 million ($45 million), down 5.7%, as
the spread of Severe Acute Respiratory Syndrome — the SARS virus — in East Asia hampered the sales
activities of Aderans Inc. (Taiwan) during the first half of fiscal 2004. Sales recovered somewhat in the
second half, preventing sales from falling any further than they did.
By product, sales of custom-made wigs tumbled 28.0%, to ¥291 million. Sales of ready-made wigs
fell 10.7%, to ¥108 million. Sales of other hair-related products dropped 15.5%, to ¥60 million. Service
revenue contributed ¥106 million, down 21.5%. Intersegment sales slipped 2.9%, to ¥4,370 million.
As a result, operating income for Asia, excluding Japan, dropped 27.9%, to ¥988 million ($9.0
million).
Excluding
Japan
The Aderans Group is represented by 11 consolidated subsidiaries, including four that
wholesale men’s and women’s wigs; Aderans, Inc., a retailing company; and Bosley
Medical Institute, Inc., which provides hair-transplant services, under the Aderans
Holding umbrella.
Aggregate sales in North America dipped 0.5%, to ¥12,725 million ($116 million), but the result
might have been worse if the local economy, which stalled with the war in Iraq, had not shown signs of
gradual recovery.
In a breakdown by product category, sales of custom-made wigs fell 11.2%, to ¥397 million, while
sales of ready-made wigs, such as the high-quality Noriko and Amore collections, declined 9.2%, to
¥3,243 million. Sales of other hair-related products bucked the downward trend with a 6.0% increase, to
¥264 million. Service revenue, including contributions from the hair-transplant business, also rose, up
1.8%, to ¥8,284 million. Intersegment sales soared 38.7%, to ¥534 million.
Of note, Bosley Medical Institute, which provides hair-transplant services, delivered a 9.6% increase
in sales, underpinned by the successful expansion of its network of small-scale consulting offices.
Unfortunately, appreciation of about nine yen on the U.S. dollar squeezed net sales on a yen basis.
In the end, operations in North America produced an operating loss of ¥1,045 million ($9.5 million).
However, this was 22.2% less than the ¥1,343 million operating loss recorded in fiscal 2003.
North
America
21
Europe
The Aderans Group maintains a presence in Europe through nine consolidated
companies, with operations in France, Germany, Belgium, the Netherlands and
the United Kingdom.
Favorable sales in each country, plus a full-year contribution from U.K.-based Trend Hair Supplies
Co., Ltd., which was acquired in May 2002, boosted sales 18.0%, to ¥2,670 million ($24 million).
Of this total, custom-made wigs represented ¥172 million, a 21.1% jump, ready-made wigs accounted
for ¥2,161 million, a 26.1% surge, and other hair-related products contributed ¥293 million, a 8.9%
increase. Service revenue climbed 34.4%, to ¥43 million.
Trend Hair Supplies marked steady sales of high-quality wigs with excellent fashion and performance
features. The higher profit margin on these upscale wigs helped bring operating income in Europe back
into the black.
Supported by generally good demand in Europe, operations here posted aggregate operating income
of ¥4 million ($39 thousand), returning to a positive profit position after an ¥11 million operating loss in
fiscal 2003.
Cash and cash equivalents at February 29, 2004, stood at ¥16,819 million ($153 million), down 11.1%
Cash Flow, Capital
from a year earlier.
Expenditures,
Net cash provided by operating activities fell 22.3%, to ¥7,558 million ($68 million). The major
Funding and Ratings
changes leading to this decrease were ¥10,229 million in income before income taxes, ¥2,596 million in
depreciation and amortization, and ¥992 million in the amortization of consolidation differences on the
assets side, and ¥6,237 million in payment of income taxes on the liabilities side.
Net cash used in investing activities soared 85.6%, to ¥6,309 million ($57 million). The key components of this change were ¥7,999 million applied to payment for purchase of marketable securities and
¥5,389 million applied to payment for purchase of investment securities, which overshadowed ¥10,994
million in proceeds from sales of marketable securities.
Net cash used in financing activities fell 3.1%, to ¥3,458 million ($31 million). The largest application of funds was ¥2,163 million for the repurchase of treasury stock.
Aderans has acquired long-term credit ratings from two domestic rating agencies. The Company
earned an A– from Rating and Investment Information, Inc. (R&I), and an A rating from Japan Credit
Rating Agency Ltd. (JCR).
Millions of yen
Summary of Cash Flows Statements
Net cash used in investing activities
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
GROSS CASH
FLOWS AND
CAPITAL
EXPENDITURES
(Billions of yen)
2003
% Change
¥ 7,558
(6,309)
(3,458)
(2,390)
18,921
16,819
¥ 9,729
(3,399)
(3,568)
2,486
16,435
18,921
–22.3%
85.6
–3.1
—
15.1
–11.1
FREE CASH
FLOWS
12
(Billions of yen)
10
9
5
6
0
3
-5
0
Gross cash flows
-10
2000
2001
2002
2003
2004
7.7
3.5
10.2
2.5
11.9
2.7
8.5
2.5
7.5
5.0
Gross cash flows = Net income + Depreciation and
amortization
22
2004
2000
2001
Net cash flows provided
by operating activities 9.2 12.0
Net cash flows used in
investing activities
(6.9) (7.7)
Free cash flows
2.3 4.2
2002
2003
2004
9.4
9.7
7.5
(4.7) (3.3) (6.3)
4.6 6.3 1.2
Free cash flows = Net cash flows provided by operating
activities + Net cash flows used in
investing activities
Financial Position
At February 29, 2004, total assets stood at ¥91,048 million ($830 million), down 1.9%, while total liabilities amounted to ¥17,048 million ($155 million), down 11.0%.
Current assets shrank 10.8%, to ¥35,029 million. The main reason for this change is an increase in
investment securities and a reciprocal decrease in marketable securities, following the parent’s shift in the
focus of asset management toward the midterm range.
Fixed assets grew 4.5%, to ¥56,018 million, primarily because of purchases totaling ¥2.772 million
by the parent for buildings to use as salons, and land on which to construct new salons.
The balance in the consolidation difference account dropped 24.1%, to ¥6,222 million. Major components of the change included the application of ¥843 million for amortization of goodwill in Bosley
Medical Institute, a difference of ¥294 million on a share exchange with Fontaine, and a loss of about
¥700 million caused by the high yen-to-U.S. dollar rate prevailing at year-end.
Current liabilities slipped 13.6%, to ¥11,778 million. As a result, the current ratio (ratio of current
assets to current liabilities) climbed 9.4 percentage points, to 297.4%.
Total shareholders’ equity rose 5.0%, to ¥73,884 million ($674 million), owing to higher retained
earnings. The equity ratio gained 5.5 percentage points, to 81.2%.
Millions of yen
Summary of Financial Position
Total assets
Total liabilities
Shareholders’ equity to total assets (%)
RETURN ON EQUITY
AND
RETURN ON ASSETS
12
(%)
2004
2003
2002
2001
2000
¥91,048
17,048
73,884
81.2
¥92,864
19,152
70,303
75.7
¥92,284
20,365
68,577
74.3
¥83,890
18,866
62,126
74.1
¥75,101
16,772
55,648
74.1
INTEREST-BEARING
DEBT RATIO AND
DEBT TO
1.5
EQUITY RATIO
(%)
8
1.0
4
0.5
0
0
Return on equity
Return on assets
2000
2001
2002
2003
2004
10.9
7.9
13.6
10.1
14.1
10.4
8.9
6.7
6.9
5.4
WORKING CAPITAL
AND CURRENT
25
RATIO
2000
250
ASSET TURNOVER
RATIO
2002
2003
2004
749
145
—
—
0.9
1.2
0.2
0.2
—
—
—
—
2000
2001
2002
2003
2004
0.86
0.84 0.84
1.0
(Times)
Left Scale
(Billions of yen)
20
200
0.8
Right Scale
(%)
15
150
0.6
10
100
0.4
5
50
0.2
0
0
0
2000
Current assets
Current liabilities
Working capital
Current ratio (%)
2001
(Millions of yen)
851
Interest-bearing
debt ratio
1.1
Debt to equity ratio 1.5
2001
2002
2003
2004
28.8 37.9 33.8 39.2
12.3 13.4 14.9 13.6
16.4 24.5 18.8 25.6
232.8 282.1 226.0 288.0
35.0
11.7
23.2
297.4
Asset turnover ratio
0.83 0.80
23
Consolidated Balance Sheets
February 29, 2004 and February 28, 2003
Millions of yen
2004
ASSETS
LIABILITIES AND
SHAREHOLDERS’
EQUITY
Current assets:
Cash and time deposits (Note 4)
Marketable securities (Note 6)
Notes and accounts receivable
Allowance for doubtful accounts
Inventories (Note 5)
Deferred tax assets (Note 8)
Other current assets
Total current assets
Investments and long-term loans:
Long-term loans receivable
Investment securities (Note 6)
Total investments and long-term loans
Property, plant and equipment, at cost:
Land
Buildings and structures
Machinery and equipment
Construction in progress
Other
Total
Less accumulated depreciation
Property, plant and equipment, net
Intangible assets
Security deposits
Deferred tax assets (Note 8)
Other assets
Allowance for doubtful accounts
Total assets
Current liabilities:
Notes and accounts payable
Accrued income taxes (Note 8)
Accrued expenses
Deferred tax liabilities (Note 8)
Other current liabilities
Total current liabilities
Long-term liabilities:
Accrued severance and retirement benefits—employees (Note 7)
Accrued severance and retirement benefits—directors and
corporate auditors
Other long-term liabilities
Total long-term liabilities
Total liabilities
Minority interests
Contingent liabilities (Note 10)
Shareholders’ equity (Note 9):
Common stock, no par value
Authorized—138,033 thousand shares for 2004 and 2003
Issued—41,713 thousand shares for 2004 and 2003
Additional paid-in capital
Retained earnings
Unrealized gain (loss) on available-for-sale securities
Foreign currency translation adjustments
Treasury stock, at cost
Total shareholders' equity
Total liabilities, minority interests and shareholders’ equity
See Notes to the Consolidated Financial Statements.
24
Thousands of
U.S. dollars
2003
¥ 12,965 ¥ 10,873
10,111
15,905
5,617
5,646
(67)
(71)
3,966
4,615
1,213
973
1,222
1,339
35,029
39,282
10
7,458
7,469
2004
$ 118,274
92,242
51,246
(613)
36,181
11,067
11,155
319,554
59
4,873
4,933
97
68,041
68,139
13,996
13,282
31,490
29,297
5,554
5,124
172
447
1,038
1,007
52,251
149,159
(20,414) (19,182)
31,837
29,976
9,713
12,173
3,933
3,759
1,852
1,572
1,231
1,192
(19)
(27)
¥ 91,048 ¥ 92,864
127,678
287,273
50,667
1,571
9,473
476,664
(186,225)
290,439
88,607
35,879
16,902
11,236
(180)
$ 830,579
¥
$
985
2,774
1,086
3
6,928
11,778
¥
1,192
3,282
2,021
1
7,141
13,638
8,990
25,310
9,909
33
63,202
107,445
3,081
2,872
28,110
863
1,325
5,270
17,048
114
793
1,847
5,513
19,152
3,408
7,877
12,094
48,082
155,528
1,043
12,944
13,157
50,974
(140)
(1,219)
(5,412)
70,303
92,864
118,081
120,026
476,784
149
(20,798)
(20,235)
674,007
$ 830,579
12,944
13,157
52,265
16
(2,279)
(2,218)
73,884
¥ 91,048 ¥
Consolidated Statements of Income
For the years ended February 29, 2004 and February 28, 2003
Millions of yen
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 13)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Unrealized loss on investment securities
Devaluation of land
Exchange loss on foreign currency translation
Loss on disposal of property, plant and equipment
Other income and expenses, net
Total other income (expenses)
Thousands of
U.S. dollars
2004
2003
2004
¥73,881
13,146
60,734
¥77,112
13,080
64,032
$673,976
119,926
554,049
49,938
10,796
51,058
12,973
455,559
98,490
95
(7)
—
(825)
(201)
(58)
430
(567)
189
(19)
(189)
—
(328)
(94)
211
(231)
873
(70)
—
(7,529)
(1,834)
(536)
3,924
(5,173)
Income before income taxes and minority interests
Income taxes (Note 8)
Current
Deferred
Minority interests
Net income
10,229
12,742
93,317
5,728
(641)
(141)
¥ 5,001
6,569
(356)
(356)
¥ 6,173
52,254
(5,850)
(1,288)
$ 45,625
Net income per common share (Note 14) (in the whole yen)
¥120.46
¥147.82
$
1.09
25
Consolidated Statements of Shareholders’ Equity
Millions of yen
2004
2003
2004
¥12,944
¥12,944
$118,081
¥12,944
¥12,944
$118,081
¥13,157
¥13,157
¥13,157
¥13,157
$120,026
$120,026
¥50,974
¥46,120
$465,009
5,001
—
6,173
55
45,625
—
1,235
173
14
2,287
¥52,265
1,195
179
—
—
¥50,974
11,266
1,582
132
20,868
$476,784
Unrealized gain (loss) on available-for-sale securities:
Balance, beginning of year
Net change
Balance, end of year
¥ (140)
157
¥
16
¥
(46)
(94)
(140)
$ (1,283)
1,432
$
149
Foreign currency translation adjustments:
Net change
¥ (1,219)
(1,060)
¥ (2,279)
¥
(172)
(1,047)
¥ (1,219)
$ (11,124)
(9,673)
$ (20,798)
¥ (5,412)
(2,163)
5,547
(190)
¥ (3,426)
(1,986)
—
—
$ (49,371)
(19,736)
50,608
(1,735)
¥ (2,218)
¥ (5,412)
$ (20,235)
Common stock:
(2004—41,713,388 shares; 2003—41,713,388 shares)
Additional paid-in capital:
Retained earnings:
Increase in retained earnings:
Net income
Others
Decrease in retained earnings:
Cash dividends
Bonuses to directors and statutory auditors
Loss on consolidation of new subsidiary
Loss on exchange of treasury stock
Treasury stock:
Purchases of treasury stock
Exchange for the common stock of Fontaine Co., Ltd.
Treasury stock held by Fontaine Co., Ltd.
(2004—735,402 shares; 2003—1,355,642 shares)
26
Thousands of
U.S. dollars
¥
Consolidated Statements of Cash Flows
Millions of yen
Thousands of
U.S. dollars
2004
2003
2004
¥10,229
2,596
155
992
(2)
224
825
—
(95)
7
18
589
(245)
(281)
(185)
(1,121)
13,708
95
(7)
(6,237)
7,558
¥12,742
2,370
133
1,030
(1)
249
—
189
(189)
19
131
(14)
(888)
335
(192)
32
15,948
154
(39)
(6,332)
9,729
$ 93,317
23,684
1,422
9,051
(22)
2,052
7,529
—
(873)
70
173
5,377
(2,237)
(2,563)
(1,689)
(10,233)
125,057
868
(70)
(56,900)
68,955
Cash flows from investing activities:
Payment for purchase of marketable securities
Proceeds from sales of marketable securities
Payment for purchase of property, plant and equipment
Payment for purchase of intangible assets
Payment for purchase of investment securities
Proceeds from sales of investment securities
Payment for purchase of investment in subsidiaries
Other
Net cash used in investing activities
(7,999)
10,994
(4,734)
(561)
(5,389)
1,084
—
295
(6,309)
(11,011)
7,793
(2,217)
(567)
(3,310)
6,274
(781)
421
(3,399)
(72,974)
100,296
(43,186)
(5,117)
(49,167)
9,895
—
2,695
(57,557)
Cash flows from financing activities:
Payments of short-term borrowings
Payment to acquire treasury stock
Payment by consolidated subsidiaries to acquire treasury stock
Cash dividends paid
Other
Net cash used in financing activities
—
(2,163)
(0)
(1,235)
(59)
(3,458)
(137)
(1,985)
(189)
(1,195)
(60)
(3,568)
—
(19,736)
(3)
(11,266)
(545)
(31,552)
(181)
(2,390)
18,921
(275)
2,486
16,435
(1,653)
(21,808)
172,614
Cash flows from operating activities:
Income before income taxes and minority interests
Loss on retirement of fixed assets
Amortization for consolidation difference
Change in allowance for employees’ bonus
Increase in accrued severance benefits—employees
Devaluation of land
Unrealized loss on investment securities
Interest and dividend income
Interest expenses
Change in notes and accounts receivable
Decrease in inventories
Change in notes and accounts payable
Change in guarantee deposits
Bonuses to directors and statutory auditors
Other
Subtotal
Proceeds from interest and dividend income
Payment of interest
Payment of income taxes
Effects of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents held by newly consolidated subsidiary
at beginning of year
Cash and cash equivalents at the end of year
288
¥16,819
—
¥18,921
2,630
$153,436
27
Notes to the Consolidated Financial Statements
Note 1.
The accompanying consolidated financial statements of Aderans Company Limited (the “Company”) and
Basis of Presenting
its consolidated subsidiaries have been prepared in accordance with accounting principles generally
Consolidated
Financial Statements accepted in Japan, and from consolidated financial statements filed with the Minister of Finance, as
required by the Securities and Exchange Law of Japan.
Certain items presented in the original financial statements have been reclassified for the convenience
of readers outside Japan.
As permitted under the Securities and Exchange Law of Japan, amounts of less than one million yen
have been omitted. As a result, the totals shown in the accompanying financial statements (both in yen
and in dollars) do not necessarily agree with the sum of the individual amounts. The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries.
Note 2.
Summary of
Significant
Accounting Policies
(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries (the “Companies”).
All significant intercompany transactions and unrealized profits among the Companies have been
eliminated in consolidation. The difference between the cost and underlying net equity of investments in
consolidated subsidiaries is deferred and amortized within ten years.
Investments in remaining non-consolidated subsidiaries are not accounted for by the equity method
because of the immaterial effect on the consolidated financial statements.
Fiscal year end of two domestic consolidated subsidiaries and all overseas consolidated subsidiaries is
December 31, which differ from that of the Company; however, the accounts of these subsidiaries have
been consolidated with appropriate adjustments for the intercompany transactions and events to the end
of fiscal year.
(b) Cash and cash equivalents
For the purpose of consolidated statements of cash flows, the Companies consider all highly liquid low
risk investments with maturities of three months or less when purchased to be cash equivalents.
(c) Marketable and investment securities
Marketable and investment securities are classified and accounted for, depending on management intent.
Based on the examination of the intent of holding, the Company classified those securities as held-tomaturity debt securities, equity securities issued by non-consolidated subsidiaries and available-for-sale
securities.
Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by non-consolidated subsidiaries are stated at cost by the moving average method.
Available-for-sale securities are with available fair market values are stated the market value.
Unrealized gains or losses on those securities are reported, net of applicable income taxes, as a separate
component of shareholders’ equity. Realized gains and losses on sale of such securities are computed by
the moving average method. Available-for-sale securities without available fair market value are stated at
cost by the moving average method.
(d) Allowance for doubtful accounts
Allowance for doubtful accounts are stated at an amount considered to be appropriate based on the
Companies’ past credit loss experience and an evaluation of potential losses in the receivables outstanding. Overseas consolidated subsidiaries provide for doubtful accounts at the estimated amount of
uncollectible receivables.
(e) Inventories
Custom-made goods are stated at cost on the basis of specific identification method. Ready-made goods
are stated at cost on the basis of average method. Raw materials and work in process are stated at lower of
cost (first-in, first-out) or market, or lower of moving average cost or market. Supplies are principally
stated at cost on the basis of specific identification method.
(f) Property, plant and equipment
Property, plant and equipment of the Companies have been principally depreciated by the declining-balance method, at rates based on the estimated useful lives of the assets.
However, the straight-line method has been applied to buildings, excluding building fixtures,
acquired after April 1, 1998 at rates based on the estimated useful lives of assets. The straight-line
method is used for some domestic consolidated subsidiaries.
The straight-line method is principally used for overseas consolidated subsidiaries. Expenditures for
maintenance and repairs are charged to operating expenses as incurred. Upon the disposal of property,
28
plant and equipment, the cost and accumulated depreciation are removed from the accounts and any
gain or loss is recorded as income or expenses.
(g) Intangible assets
Intangible assets are carried at cost less accumulated amortization, which is calculated by the straight-line
method over the estimated useful lives. (five years for software)
(h) Allowance for employees’ bonuses
The Company and its domestic consolidated subsidiaries provide allowance for employees’ bonuses at
the estimated-amount-method based on the bonuses to be paid subsequent to the balance sheet dates.
This allowance amounted to ¥1,405 million ($12,821) at February 29,2004 and ¥1,407 million at
February 28, 2003 and was included in other current liabilities in the consolidated balance sheets.
(i) Warranty reserve
A warranty reserve is provided based upon prior actual experience, while the Companies provide a warranty on its goods. This reserve amounted to ¥124 million ($1,133 thousand) at February 29, 2004 and
¥132 million at February 28, 2003 and was included in other current liabilities in the consolidated balance sheets.
(j) Allowance for returned goods
One of the Japanese subsidiaries, Fontaine Co., Ltd., sets allowance for returned goods up. This allowance is provided based on accounts receivable multiplied by an average of sales returns rate referring
current and previous year and gross profit rate of current year. Amounted to ¥124 million ($1,137 thousand) at February 29, 2004 and ¥185 million at February 28, 2003 and was included in other current
liabilities in the consolidated balance sheets.
(k) Accrued severance and retirement benefits—employees
The Company and its consolidated subsidiaries accounted for the liability for retirement benefits based
on the projected benefit obligations and plan assets at the balance sheet date.
Actuarial difference is amortized using the straight-line method over the estimated average remaining
service lives (five years) of employees commencing with the following period.
(l) Accrued severance and retirement benefits—directors and corporate auditors
The Company, one domestic consolidated subsidiary and some overseas consolidated subsidiaries have
recorded retirement benefits for directors and corporate auditors accruing the full amount at the balance
sheet date.
(m) Translation of foreign currency accounts
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the current rate at
the end of year except for shareholders’ equity accounts, which are translated at historical rates. Statements of income of consolidated overseas subsidiaries are translated at the average rate. Differences
arising from such translation are disclosed under “Foreign currency translation adjustments” on the statement of consolidated shareholders’ equity and accumulated in the shareholders’ equity section of the
consolidated balance sheet.
(n) Derivative financial instruments
In accordance with the accounting standard for financial instruments, all derivative financial instruments,
recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income.
(o) Leases
Finance leases which do not transfer ownership to lessees (and do not have bargain purchase provisions)
are accounted for in the same manner as operating leases under accounting principles generally accepted
in Japan.
(p) Research and development costs
Research and development costs are charged to income when incurred.
(q) Reclassifications
In preparing the accompanying consolidated financial statements, certain reclassifications have been
made to the consolidated financial statements for the year ended February 29, 2004 issued domestically.
In addition, the consolidated financial statements for 2003 have been retroactively restated to conform to
the 2004 presentation.
Note 3.
U.S. Dollar Amounts
The financial statements are stated in Japanese yen. The U.S. dollar amounts included in the financial
statements and notes thereto represent the arithmetical results of translating yen into U.S. dollars at the
rate of ¥109.62 to U.S.$1. This is the approximate rate of exchange in effect on February 29, 2004.
29
Note 4.
Cash and Cash
Equivalents
Reconciliation of cash and time deposits in the consolidated balance sheets and cash and cash equivalents
shown in the consolidated statements of cash flows at February 29, 2004 and February 28, 2003 were as
follows:
Thousands of
U.S. dollars
Millions of yen
Cash and time deposits
Cash equivalents included in marketable securities
Time deposits with maturities more than three months
Cash and cash equivalents
2004
2003
2004
¥12,965
4,501
(647)
¥16,819
¥10,873
8,899
(850)
¥18,921
$118,274
41,064
(5,903)
$153,436
Note 5.
Inventories
At February 29, 2004 and February 28, 2003, inventories consisted of the following:
Thousands of
U.S. dollars
Millions of yen
Finished goods
Work in process
Raw materials and supplies
Total
2004
2003
2004
¥2,801
183
981
¥3,966
¥3,384
157
1,073
¥4,615
$25,559
1,672
8,949
$36,181
Note 6.
(1) The following tables summarize acquisition costs, book values and fair value of securities at February
Marketable and
29, 2004 and February 28, 2003
Investment Securities
(a) Held-to-maturity debt securities
February 29, 2004
Securities with available fair values
exceeding book values
Bonds
Subtotal
Securities other than the above
Bonds
Subtotal
Total
Millions of yen
Thousands of U.S. dollars
Book value
Fair value
Difference
Book value
Fair value
Difference
¥5,795
5,795
¥5,801
5,801
¥5
5
$52,872
52,872
$52,926
52,926
$ 53
53
2,896
2,896
¥8,692
2,895
2,895
¥8,696
(1)
(1)
¥4
26,424
26,424
$79,297
26,411
26,411
$79,337
(12)
(12)
$ 40
Millions of yen
February 28, 2003
Securities with available fair values
exceeding book values
Bonds
Subtotal
Bonds
Subtotal
Total
Book value
Fair value
Difference
¥1,700
1,700
¥1,701
1,701
¥1
1
4,600
4,600
¥6,300
4,596
4,596
¥6,298
(3)
(3)
¥(1)
(b) Available-for-sale securities
February 29, 2004
Securities with book values exceeding
acquisition costs
Equity securities
Subtotal
Equity securities
Subtotal
Total
30
Millions of yen
Book value
Fair value
Difference
Book value
Fair value
Difference
¥277
277
¥491
491
¥ 214
214
$2,529
2,529
$4,482 $ 1,952
4,482 1,952
662
662
¥939
471
471
¥963
(190)
(190)
¥ 23
6,040
6,040
$8,569
4,305 (1,735)
4,305 (1,735)
$8,787 $ (217)
Millions of yen
February 28, 2003
Securities with book values exceeding
acquisition costs
Equity securities
Others
Subtotal
Equity securities
Subtotal
Total
Book value
Fair value
¥
¥
29
200
229
1,451
1,451
¥1,680
Difference
38
203
241
¥
1,184
1,184
¥1,425
8
3
11
(266)
(266)
¥(254)
(2) Total sales of available-for-sale securities sold for the year ended February 29, 2004 amounted to
¥542 million ($4,948 thousand) and February 28, 2003 amounted to ¥178 million. The related gains
and losses for the year ending 2004 amounted to ¥370 million ($3,380 thousand) and ¥30 million
($275 thousand), respectively and 2003 amounted to ¥40 million and ¥0 million, respectively
(3) The following tables summarize book values of securities with no available fair values at February 29,
2004 and February 28, 2003
Thousands of
U.S. dollars
Millions of yen
Held-to-maturity debt securities
Commercial paper
Available-for-sale securities
Money management funds
2004
2003
2004
¥5,997
¥8,995
$54,716
¥1,502
¥2,901
$13,702
(4) Available-for-sale securities with maturities and held-to-maturity debt securities were as follows:
Millions of yen
February 29, 2004
Bonds
Others
Total
Within
one year
Within
five years
Within
ten years
Over
ten years
Within
one year
Within
five years
Within
ten years
Over
ten years
¥2,600
5,997
¥8,597
¥6,092
—
¥6,092
¥—
—
¥—
¥—
—
¥—
$23,718
54,716
$78,434
$55,578
—
$55,578
$—
—
$—
$—
—
$—
Millions of yen
February 28, 2003
Bonds
Others
Total
Within
one year
Within
five years
Within
ten years
Over
ten years
¥ 4,000
8,995
¥12,995
¥2,300
—
¥2,300
¥—
—
¥—
¥—
—
¥—
Note 7.
Employees who terminate their service with the Company or one of the domestic consolidated subAccrued Severance
sidiaries are entitled to defined benefit pension plans, i.e., tax-qualified pension plans and lump-sum
and Retirement
Benefits—Employees payment plans determined by reference to basic rates of pay, length of service and conditions under
which the termination occurs. Another domestic subsidiary has maintained unfounded lump-sum payment plans, whereas certain overseas subsidiaries have defined contribution pension plans or non-funded
lump-sum payment plans.
The following table sets forth the founded and accrued status of the retirement benefits, and the
amounts recognized in the consolidated balance sheets as of February 29, 2004 and February 28, 2003:
Millions of yen
(a) Projected retirement benefit obligation
(b) Pension assets at fair value
(c) Unfunded retirement benefit obligation (a)+(b)
(d) Unrecognized actuarial differences
(e) Accrued employees’ sererance and retirement benefits (c)+(d)
Thousands of
U.S. dollars
2004
2003
2004
¥(5,399)
1,954
(3,444)
363
¥(3,081)
¥(5,226)
1,786
(3,439)
567
¥(2,872)
$(49,256)
17,832
(31,424)
3,314
$(28,110)
31
The component of retirement benefit costs for the years ended February 29, 2004 and February 28,
2003 were as follows:
Millions of yen
2004
(a) Service cost
(b) Interest cost
(c) Expected return on plan assets
(d) Amortization for actuarial difference
Total
2003
¥424
101
(17)
127
¥635
¥424
110
(16)
70
¥589
Thousands of
U.S. dollars
2004
$3,873
922
(163)
1,164
$5,797
The assumptions used to calculate relating to retirement benefit liabilities were as follows:
(a) Method of allocation of estimated retirement benefits
(b) Discount rate
(c) Expected rate of return on pension assets
(d) Amortization period of actuarial difference
(e) Amortization period of difference arising from
initial adoption of new accounting standard at transition
Straight–line method
2.00%
1.00%
5 years
1 year
Note 8.
Income Taxes
The Company and domestic consolidated subsidiaries are subject to a number of taxes based on income,
which in the aggregate amount to statutory tax rates of approximately 42.1% for the year of 2004 and
2003. Foreign consolidated subsidiaries are subject to income taxes of countries in where they operate.
However, income taxes as shown in the accompanying consolidated statements of income differ from
the amounts computed by applying the above-mentioned statutory tax rates to “income before income
taxes”. The principal reason for this difference is the effect of timing differences in the recognition of certain expenses for tax and financial reporting purposes and the effect of permanent non-deductible
expenses.
Significant components of the deferred tax assets and liabilities held by the Company and its consolidated subsidiaries as of February 29, 2004 and February 28, 2003 were summarized as follows:
Millions of yen
2004
Deferred tax assets:
Unrealized profits on inventories
Excess of retirement allowance
Accrued severance benefits for directors
Enterprise tax payable
Excess of allowance for employees’ bonuses
Warranty reserve
Allowance for returned goods
Excess of depreciation
Unrealized loss on golf club memberships
Net loss carry forward
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Reserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax assets
32
137
997
349
237
492
52
52
651
126
949
773
4,820
(1,713)
3,106
2003
139
822
334
285
374
117
77
349
128
1,073
299
4,003
(1,421)
2,582
Thousands of
U.S. dollars
2004
¥
¥
$ 1,255
9,096
3,188
2,164
4,488
482
478
5,943
1,157
8,657
7,056
43,970
(15,628)
28,342
29
14
44
¥ 3,062
32
5
38
¥ 2,544
271
134
406
$ 27,936
The difference between the statutory tax rate and the Company’s effective tax rate reflected in the
consolidated statement of income for the years ended February 29, 2004 and February 28, 2003 were as
follows:
2004
Statutory tax rate
Permanently non-deductible expenses
Inhabitant tax on capita basis
Changes in valuation allowance for deffered tax assets
Others
The Company’s effective income tax rate
2003
42.1%
0.6
1.4
2.9
2.7
49.7%
42.1%
0.5
1.1
4.3
0.7
48.7%
On March 31, 2003, a tax reform law was enacted in Japan which changed the normal effective statutory tax rate from 42.1% to 40.7%, effective for years beginning on or after April 1, 2004. The effect of
this change was to decreased deferred tax assets (less deferred tax liabilities) by ¥61 million, credit
amount of income taxes—deferred by ¥61 million and increased unrealized gain on available-for-sale
securities by 0 million in the consolidated financial statements for the year ended February 29, 2004.
Note 9.
Shareholder’s Equity Under the Commercial Code of Japan, the entire amount of the issue price of shares is required to be
accounted for as common stock, although a company may, by resolution of its board of directors,
account for an amount not exceeding one-half of the issue price of the new shares as additional paid-in
capital.
Effective October 1, 2001, the Japanese Commercial Code provides that an amount equal to at least
10% of cash dividends and other cash appropriations shall be appropriated and set aside as a legal
reserve until the total amount of legal reserve and additional paid-in capital equals 25% of common
stock. The legal reserve and additional paid-in capital may be used to eliminate or reduce a deficit by resolution of the shareholders’ meeting or may be capitalized by resolution of the board of directors.
On condition that the total amount of legal reserve and additional paid-in capital remains being equal
to or exceeding 25% of common stock, they are available for distributions and certain other purposes by
the resolution of shareholders’ meeting. Legal reserve is included in retained earnings in the accompanying consolidated financial statements. The maximum amount that the Company can distribute as
dividends is calculated based on the unconsolidated financial statements of the Company in accordance
with the Code.
Note 10.
Contingent Liabilities One of domestic consolidated companies was contingently liable as a surety for bank loans of members of
a golf course. The aggregate amount at February 28, 2003 was ¥0 million.
Note 11.
Derivative Financial
Instruments
The Company utilizes currency option contracts primarily to hedge their exposure to fluctuations in foreign exchange rates. As a matter of policy, the Company does not speculate in derivatives.
Derivative transactions are controlled by the Treasury Office of the Company based on internal rules.
The contract amounts and unrealized gain or loss at February 29, 2004 and February 28, 2003 of
outstanding derivative transactions were as follows:
Currency-related transactions
Millions of yen
2004
Options:
Call options, sold:
Yen—Notional amount
Fair value
Put options, purchased:
Yen—Notional amount
Fair value
Total—Notional amount
Unrealized gain (loss)
2003
Thousands of
U.S. dollars
2004
¥1,644
(97)
¥3,179
(104)
$15,000
(889)
548
4
2,192
¥ (92)
1,059
47
4,239
¥ (56)
5,000
43
20,000
$ (845)
The notional amounts of derivatives which are shown in the above table do not represent the
amounts exchanged by the parties and do not measure the company’s exposure to risk.
33
Note 12.
Leases
(1) Finance Leases
Future lease payments and lease payments under finance lease at February 29, 2004 and February
28, 2003 were as follows:
Thousands of
U.S. dollars
Millions of yen
Outstanding finance lease payments
Within one year
Over one year
Total
Lease payments
2004
2003
2004
¥ 96
53
150
¥159
¥156
107
264
¥171
$ 884
486
1,370
$1,458
A summary of assumed amounts of acquisition cost, accumulated depreciation and net book
value at February 29, 2004 and February 28, 2003 were as follows:
Millions of yen
February 29, 2004
Equipment
Vehicle
Total
Acquisition
cost
Accumulated
depreciation
Net book
value
Acquisition
cost
Accumulated
depreciation
Net book
value
¥749
44
¥793
¥616
26
¥643
¥132
17
¥150
$6,835
402
$7,237
$5,625
241
$5,867
$1,209
161
$1,370
Millions of yen
February 28, 2003
Equipment
Vehicle
Software
Total
Acquisition
cost
Accumulated
depreciation
¥777
63
5
¥847
¥547
29
5
¥583
Net book
value
¥229
34
0
¥264
(2) Operating Leases
Future lease payments under operating lease at February 29, 2004 and February 28, 2003 were as
follows:
Millions of yen
Outstanding lease payments
Within one year
Over one year
Total
2004
2003
¥ 490
1,162
¥1,652
¥ 548
1,623
¥2,171
Thousands of
U.S. dollars
2004
$ 4,475
10,602
$15,077
Note 13.
Research and
Development Costs
Research and development costs included in selling, general and administrative expenses for the year
ended February 29, 2004 and February 28, 2003 amounted to ¥591 million ($5,394 thousand) and
¥519 million, respectively.
Note 14.
Net Income per
Common Share
34
Effective April 1, 2002, the Company adopted a new accounting standard for earnings per share of common stock issued by the Accounting Standards Board of Japan. Under the new standard, basic net
income per share is computed by dividing net income available to common shareholders, which is more
precisely computed than under previous practice, by the weighted-average number of common stock
shares outstanding for the period. Computation of the basic net income under the new standard is
retroactively applied to prior year.
The Company did not have securities or contingent stock agreements that could potentially dilute net
income per common share in the year ended February 29, 2004 and February 28, 2003.
Note 15.
Segment Information (1) Business Segments
As the ratios of “Hair-related business” against the total sales, operating income and assets of all segment exceed 90%, information by business segment is not prepared or disclosed.
(2) Geographical Segments
Millions of yen
Year ended February 29, 2004
Sales
Outside customers
Intersegment
Total
Operating expenses
Operating income
Total assets
Japan
North America
Europe
¥58,453 ¥12,191 ¥2,670
79
534
—
58,532
12,725
2,670
43,972
13,770
2,665
¥14,560 ¥ (1,045) ¥
4
¥67,502 ¥10,178 ¥2,492
Asia
Total
Elimination
Consolidated
¥ 566
4,370
4,936
3,947
¥ 988
¥6,186
¥73,881
4,938
78,865
64,356
¥14,508
¥86,360
¥
—
(4,983)
(4,983)
(1,271)
¥(3,721)
¥ 4,687
¥73,881
—
73,881
63,084
¥10,796
¥91,048
Sales
Outside customers
Intersegment
Total
Operating expenses
Operating income
Total assets
Japan
North America
Europe
Asia
Total
Elimination
Consolidated
$533,236 $111,213 $24,358 $ 5,168 $673,976 $
— $673,976
722
4,875
— 39,868
45,465 (45,465)
—
533,958 116,088 24,358 45,036 719,442 (45,465) 673,976
401,131 125,623 24,318 36,015 587,088 (11,602) 575,486
$132,827 $ ( 9,535) $
39 $ 9,021 $132,353 $(33,863) $ 98,490
$615,789 $ 92,854 $22,738 $56,438 $787,820 $ 42,759 $830,579
Millions of yen
Sales
Outside customers
Intersegment
Total
Operating expenses
Operating income
Total assets
Japan
North America
Europe
Asia
¥61,816 ¥12,404 ¥2,159 ¥ 732
100
385
103
4,502
61,916
12,790
2,262
5,234
45,407
14,133
2,273
3,863
¥16,509 ¥ (1,343) ¥ (11) ¥1,371
¥65,239 ¥13,150 ¥2,196 ¥5,581
Total
Elimination
Consolidated
¥77,112
5,091
82,204
65,678
¥16,525
¥86,167
¥
—
(5,091)
(5,091)
(1,539)
¥(3,552)
¥ 6,697
¥77,112
—
77,112
64,138
¥12,973
¥92,864
(3) Overseas Sales
Millions of yen
Overseas sales
Consolidated net sales
Share of overseas sales
North America
Europe
¥12,067
¥2,941
16.3%
4.0%
Asia
Others
¥494
¥38
0.7%
0.0%
Total
¥15,541
¥73,881
21.0%
North America
Europe
Asia
Others
Overseas sales
$110,084
$26,835
$4,511
$347
North America
Europe
¥12,085
¥2,421
16.3%
4.0%
0.7%
Total
$141,779
$673,976
0.0%
21.0%
Millions of yen
Overseas sales
15.7%
3.1%
Asia
¥639
0.8%
Others
Total
¥122
¥15,268
¥77,112
0.2%
19.8%
35
Note 16.
Related Party
Transactions
Transactions with related parties for the years ended February 29, 2004 and February 28, 2003 were as
follows:
Thousands of
U.S. dollars
Millions of yen
2004
KK Keiho Shoji:
Travel expenses
Kowa Shoji KK:
Rental income
Fontaine Co., Ltd.:
Purchase for land
¥
2003
2004
1
¥ 1
$
16
2
2
23
¥1,559
—
$14,227
Note 17.
Subsequent Events
36
On May 27, 2004, the shareholders of the Company approved payment of a year-end cash dividend of
¥16.00 ($0.14) per share to holders of recorded at February 29, 2004, totaling ¥657 million ($5,996
thousand) and bonuses to directors and corporate auditors of 148 million ($1,358 thousand).
Report of Independent Auditors
To the Board of Directors of
We have audited the accompanying consolidated balance sheets of Aderans Company Limited and consolidated subsidiaries at February 29, 2004 and February 28, 2003, and the related consolidated
statements of income, shareholders’ equity, and cash flows for the years then ended, all expressed in yen.
These financial statements are the responsibility of the Company’s management. Our responsibility is to
independently express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally
accepted and applied in Japan. Those standards, procedures and practices require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Aderans Company Limited and consolidated subsidiaries at February
29, 2004 and February 28, 2003, and the consolidated results of their operations and their cash flows for
the years then ended in conformity with accounting principles and practices generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the
year ended February 29, 2004 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the
basis described in Note 3 to the consolidated financial statements.
Tokyo, Japan
May 27, 2004
37
Non-Consolidated Five-Year Summary
Years ended the last day of February
Millions of yen
2004
RESULTS OF OPERATIONS
Net sales
2000
7,998
8,483
10,642
9,653
9,080
Gross profit
39,758
42,405
44,633
43,072
41,666
30,553
31,414
30,601
29,866
29,208
Operating income
9,205
10,990
14,031
13,205
12,458
Income before income taxes
9,957
11,313
12,081
12,375
10,821
Net income
5,671
6,476
6,952
7,150
4,938
5,709
1,831
1,979
2,122
2,994
620
467
314
371
214
1,684
1,582
1,553
1,538
1,293
AMOUNTS PER SHARE
OF COMMON STOCK
(IN YEN)
Net income
FINANCIAL POSITION
Current assets
¥ 137.85 ¥ 156.10 ¥ 169.86 ¥ 171.42 ¥ 117.72
1,746.10
1,640.46
1,548.98
1,464.47
1,305.07
32.00
30.00
28.00
26.00
25.00
¥ 19,586 ¥ 24,449 ¥ 20,979 ¥ 27,802 ¥ 20,865
Current liabilities
9,072
9,374
9,242
10,496
10,192
—
—
—
—
—
71,880
66,357
63,293
61,088
54,439
Total assets
84,606
78,976
75,561
74,863
66,325
19.3
21.6
25.4
25.0
24.6
Operating income to net sales
Net income to net sales
11.9
12.7
12.6
13.6
9.7
Shareholders’ equity to total assets
85.0
84.0
83.8
81.6
82.1
Return on equity
8.2
10.0
11.2
12.3
9.2
Return on assets
6.9
8.4
9.2
10.1
7.5
—
—
—
—
—
41,081
40,357
40,861
41,154
41,400
2,103
2,137
2,068
1,908
1,789
Interest-bearing debt ratio
Number of employees
COMMON STOCK PRICES
(IN YEN)
2001
Cost of sales
OTHER YEAR-END DATA
2002
¥ 47,757 ¥ 50,888 ¥ 55,275 ¥ 52,726 ¥ 50,746
Research and development expenses
KEY RATIOS (%)
2003
High
2,485 ¥
4,250 ¥
4,720 ¥
5,000 ¥
6,100
Low
¥
1,664
2,180
3,410
2,670
2,850
Year-end close
2,200
2,225
4,050
3,890
3,000
Note: Net income per share and shareholders’ equity per share for both 2004 and 2003 are calculated based on the new accounting standard.
38
Non-Consolidated Operating Data
Millions of yen
SALES OF PRINCIPAL
PRODUCTS
SALES OF PRINCIPAL
PRODUCTS TO
NEW CUSTOMERS
Custom-made wigs
¥31,096
¥31,328
167
233
399
551
2,300
3,010
3,562
2,354
Hair Support
5,516
5,997
6,460
6,321
6,079
Physical Esthé
1,191
1,455
1,513
1,122
453
Total
¥40,325
¥42,872
¥44,653
¥42,501
¥40,765
Custom-made wigs
¥12,420
¥14,321
¥15,586
¥13,109
¥13,132
15
18
30
124
178
Hair Fix
Pinpoint
825
1,145
1,796
2,212
1,383
2,036
2,582
2,939
2,816
2,567
315
469
544
318
114
Total
¥15,614
¥18,539
¥20,897
¥18,581
¥17,374
Custom-made wigs
¥19,178
¥18,628
¥17,849
¥17,986
¥18,196
Hair Fix
93
149
202
274
373
Pinpoint
1,083
1,155
1,214
1,350
971
Hair Support
3,480
3,414
3,520
3,504
3,512
875
985
968
804
339
Total
¥24,710
¥24,333
¥23,755
¥23,920
¥23,391
Custom-made wigs
¥10,538
¥10,916
¥11,606
¥12,399
¥13,669
Hair Fix
102
154
225
392
538
Pinpoint
1,849
2,241
2,936
3,499
2,296
Hair Support
4,264
4,908
5,337
5,216
5,077
1,174
1,320
1,380
1,041
434
Total
¥17,928
¥19,541
¥21,485
¥22,550
¥22,014
Custom-made wigs
¥21,060
¥22,033
¥21,829
¥18,696
¥17,659
Hair Fix
6
13
8
6
13
Pinpoint
59
59
74
63
58
1,252
1,089
1,123
1,104
1,002
17
134
132
80
19
¥22,396
¥23,330
¥23,168
¥19,951
¥18,751
Hair Support
Physical Esthé
Total
NUMBER OF CUSTOMER
VISITS (THOUSAND)
2000
¥33,435
108
Physical Esthé
NUMBER OF OUTLETS
2001
¥32,950
1,908
Physical Esthé
SALES OF PRINCIPAL
PRODUCTS TO
FEMALE CUSTOMERS
2002
¥31,599
Pinpoint
Physical Esthé
SALES OF PRINCIPAL
PRODUCTS TO
MALE CUSTOMERS
2003
Hair Fix
Hair Support
SALES OF PRINCIPAL
PRODUCTS TO
REPEAT CUSTOMERS
2004
Counseling offices
9
9
9
9
9
Regular outlets
138
136
134
128
123
Ladies’ salons
25
25
25
24
23
Satellite salons
52
50
50
37
24
New-concept salons
10
6
4
2
—
Total
234
226
222
200
179
Male
886
967
1,028
979
919
Female
517
507
495
453
415
1,403
1,474
1,523
1,432
1,334
Total
39
Consolidated Subsidiaries
Company name
Main business
Established
Capital
Sells ready-made women’s fashion wigs and hairrelated products through department stores and directly
operated outlets, and sells wholesale to beauty salons.
Real estate agent.
January 5, 1979
¥1,539 million
(Acquired December 1, 2003,
as a wholly owned subsidiary)
September 2, 1972
¥90 million
(Acquired May 30, 1985)
May 1, 1985
¥654 million
(Acquired December 4, 1998)
Percentage of
parent company’s
ownership
Japan
● Fontaine Co., Ltd.
■ ADE Co., Ltd.
Advertising agent for members of the Aderans Group.
Golf course management.
■ ADN Co., Ltd.
100%
100%
83.2%
U.S.A.
● Aderans Holding Co., Inc.
Sells wigs and hair-replacement products through
directly operated outlets.
● International Hairgoods,
Wholesales custom-made wigs and other hairInc.
replacement products to wig shops and barber shops.
● New Concepts Hair Goods, Wholesales high-quality human-hair products to wig
Inc.
shops, barber shops and beauty salons.
● Rene of Paris
Wholesales and exports fashionable, high-quality wigs
and hair accessories to wig shops and beauty salons.
● General Wig
Wholesales fashion wigs and hair accessories to wig
Manufacturers, Inc.
shops, major beauty salon supply chains and beauty
salons. Exports to Latin America and Europe.
■ Bosley Medical Institute,
Undertakes hair-transplant business in the
Inc.
United States.
● Aderans, Inc.
November 23, 1994
April 19, 2001
US$83,000 thousand
US$3,000 thousand
October 31, 1968
(Acquired June 29, 1987)
February 13, 1991
(Acquired March 5, 1998)
November 1, 1976
June 14, 1963
(Acquired September 28, 1998)
US$2,546 thousand
August 3, 1989
(Acquired August 1, 2001)
US$8,261
January 9, 1992
€19,285 thousand
100%
March 1, 1980
December 5, 1956
€2,000 thousand
100%
(Indirect)
100%
(Indirect)
Europe
● Aderans Europe B.V.
US$25
US$1,000 thousand
US$37 thousand
100%
100%
(Indirect)
100%
(Indirect)
100%
(Indirect)
100%
(Indirect)
100%
(Indirect)
96.2%
(Indirect)
Netherlands
● Gesmofra S.A.S.
France
Wholesales women’s fashion wigs and hair accessories,
as well as custom-made wigs and hair-replacement
products, to wig shops and beauty salons. Sells fashion
wigs and hair accessories through department stores
and directly operated boutiques.
● Monfair Mode S.A.R.L.
Sells women’s fashion wigs and hair accessories
France
by mail order.
● Creations de Paris
Wholesales women’s fashion wigs and hair accessories,
Camaflex Vertriebs
as well as custom-made wigs and hair-replacement
G.m.b.H.
products, to wig shops and beauty salons. Retails
Germany
women’s fashion wigs and hair accessories through
department stores and directly operated boutiques
● Monfair Moden Vertriebs Wholesales men’s hair-replacement products, women’s
G.m.b.H.
fashion wigs and hair accessories to wig shops and
Germany
beauty salons in Germany and neighboring countries.
● Camaflex S.A.
Wholesales custom-made wigs and hair-replacement
Belgium
products, women’s fashion wigs and hair accessories
to wig shops and beauty salons.
● D. van Nooijen B.V.
Wholesales custom-made wigs and hair-replacement
Netherlands
products, women’s fashion wigs and hair accessories
to wig and beauty salons.
● Trend Hair Supplies
Sells custom-made wigs, hair replacement products,
Co., Ltd.
and women’s fashion wigs through directly operated
England
outlets, and sells wholesale to wig shops.
● Camaflex S.A.
France
February 16, 1987
July 26, 1966
€540 thousand
€10 thousand
€800 thousand
100%
(Indirect)
100%
(Indirect)
December 11, 1985
€50 thousand
100%
(Indirect)
September 25, 1962
€70 thousand
100%
(Indirect)
January 1, 1984
€20 thousand
100%
(Indirect)
March 26, 1973
(Acquired May 13, 2002)
£30 thousand
100%
(Indirect)
January 12, 1990
NT$20,000 thousand
100%
October 17, 1986
B170,000 thousand
100%
September 3, 1992
B15,000 thousand
100%
(Indirect)
January 31, 2002
P300,000 thousand
100%
Asia
● Aderans Inc. (Taiwan)
Taiwan
● Aderans Thai., Ltd.
Thailand
● World Quality Co., Ltd.
Thailand
● Aderans Philippines, Inc.
Philippines
●
Holding Company
40
●
Sells custom-made wigs and provides related services
through five directly operated salons.
Implants hairs into custom-made wig and hairpiece
foundations. Manufactures fashion wigs and
hair-replacement products.
Manufactures the foundations of custom-made wigs
and hairpieces. Implants hairs into wig foundations. Dyes
and otherwise processes human hair. Produces Cyberhair.
Manufactures the foundations of custom-made wigs
and hairpieces. Implants hair into wig foundations.
Marketing Company
■
Hair-Transplant Business
■
Other Business
●
Manufacturing Company
The Aderans Group
Maximizing value potential through Wellness
Directors and Auditors
Corporate Data
As of May 27, 2004
S OLID B RAND R EPUTATION
C HAIRMAN & CEO
H EAD O FFICE
Takayoshi Okamoto*
6-3, Shinjuku 1-chome, Shinjuku-ku, Tokyo 160-8429
replacement products and hair-related services for men and women. The Company
P RESIDENT & COO
E STABLISHED
maintains Japan’s leading brand of custom-made hair-replacement products for both
Katsuji Tokumaru*
March 1, 1969
sexes and has also built a solid presence in the women’s fashion wig market through
S ENIOR M ANAGING D IRECTOR
P AID - IN C APITAL
Mamoru Mino
¥12,944 million
Established in 1969, Aderans Co., Ltd., is a comprehensive provider of hair-
Fontaine Co., Ltd., a domestic subsidiary.
C OMPREHENSIVE P RODUCTS
AND
Deputy general manager and director of sales and marketing
headquarters
S ERVICES
We augment our mainstay custom-made wigs for men and women with a rich selection
N UMBER
41,713,388
Shigeru Ueda
steady expansion of Group operations beyond wigs and hair-replacement products to
In charge of satellite salon management division, business
development division and technical & education division
hair-growth treatments and medical procedures. Toward this end, we welcomed the
start of trial activities of our first affiliated clinic in February 2004.
Hiroyasu Yamakawa
General manager of administrative division
G LOBAL P RESENCE
Senkichi Yagi
Aderans heads a group of 28 consolidated companies — three operating in Japan and
General manager of sales and marketing division
25 overseas — with a Groupwide workforce of more than 5,400 people. Members of
S UPREME A DVISORS
especially in women’s fashion wig wholesaling. This achievement is complemented by
brisk sales of men’s wigs in Taiwan, South Korea and other areas of Asia.
CONTENTS
1 Consolidated Financial Highlights
2 Message from the Management
5 From New Building Blocks Come New Growth
Evolving Perspectives; Change and Growth;
New Pillar of Growth; Global Profile;
AND
D IRECTORS
Nobuo Nemoto
Kunihiko Hirakawa
Haruo Okita
the Group in the United States and Europe have captured high market shares,
MISSION AND GOALS
S PECIAL A DVISOR
Our mission is to alleviate
S TANDING C ORPORATE A UDITOR
whatever concerns people
may have about hair loss,
regardless of the cause or
degree. Our corporate slogan
— Wellness — represents
concerted efforts to contribute
to people’s health and
happiness through an enhanced
physical appearance and a
positive state of mind. For
investors, we strive to achieve
long-term growth and higher
shareholder value.
AND
D IRECTOR
Nobuo Watabe
S HAREHOLDERS
Number of Shares and
Shareholding Ratio
Name
%
6,525
4,632
4,280
1,498
1,227
15.9
11.3
10.4
3.6
3.0
1,004
873
726
641
2.4
2.1
1.7
1.5
574
1.4
Notes: 1. The Company holds of 632 thousand of its own shares in treasury stock.
2. Those shares held by the Master Trust Bank of Japan, Limited, Japan Trustee
Services Bank, Ltd., and The Nomura Trust and Banking Co., Ltd., are shares
relating to their trust businesses.
S TOCK L ISTINGS
C ORPORATE A UDITORS
First Section of Tokyo Stock Exchange
First Section of Osaka Securities Exchange
Okio Akutsu
Masaaki Katagiri
Iwao Toigawa
Thousands of
shares
Japan Trustee Services Bank, Ltd. (Trust Account)
Nobuo Nemoto
The Master Trust Bank of Japan, Ltd. (Trust Account)
State Street Bank and Trust Company
Bank of Bermuda Sparx Asset Management
The Nomura Trust and Banking Co., Ltd.
(Investment Trust Account)
Nomura Securities Co., Ltd.
The Dai-ichi Mutual Life Insurance Company
Bank of New York Europe Limited Luxembourg
The National Mutual Insurance Federation of
Agricultural Cooperatives
Fumio Arai
T RANSFER A GENT
AND
R EGISTRAR
The Chuo Mitsui Trust and Banking Company, Limited
Securities Department
8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063
*Representative director
SALES AND MARKETING DIVISION
Hokkaido, Tohoku, Tokyo, Kanto, Chukyo, Kansai, Chugoku,
Kyushu
N UMBER
OF
O UTLETS
OF
E MPLOYEES
234
N UMBER
2,103
S TOCK P RICE R ANGE
Trading Volume
(Thousands of shares)
16 Domestic Strengths: R&D and After-Sales Services
F OR F URTHER I NFORMATION C ONTACT :
17 Financial Section
Investor Relations Division, Aderans Co., Ltd.
40 Subsidiaries and Affiliates
6-3, Shinjuku 1-chome, Shinjuku-ku,
Tokyo 160-8429, Japan
41 Directors and Auditors, Corporate Data
OF
S HARES I SSUED
P RINCIPAL S HAREHOLDERS
In charge of customer service division, IT control division, public relations division and investor relations division
research and development on hair-regeneration treatments. This move underpins
N UMBER
OF
10,620
Tsuguo Tanaka
presence in the U.S. hair-transplant business with the June 2002 commencement of
S HARES A UTHORIZED
Noboru Kaneko
D IRECTORS
the forefront of the hair-transplant and hair-growth markets, we have reinforced our
OF
138,033,400
M ANAGING D IRECTOR
In charge of advertising division and administrative division
of complementary products and hair-related services. Seeking to cement a position at
N UMBER
Tel. +81-3-3350-3268 Fax. +81-3-3356-3052
E-mail. ir_div@aderans.co.jp
Stock Price
(¥)
8,400
2,800
7,200
2,400
6,000
2,000
4,800
1,600
3,600
1,200
2,400
800
1,200
400
0
0
03
3 4
5
6
7
8
04
9 10 11 12 1 2
41
Aderans Company Limited A N N U A L R E P O R T 2 O O 4
A d e r a n s
From New Building Blocks Come New Growth
A
N N U A L
R
E P O R T
2OO4
Year ended
February 29, 2004
Uses soybean ink in
consideration of the environment
100% recycled paper
Printed in Japan

Aderans Company Limited

Transcription

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